India remains intensely engaged with the US to clinch the comprehensive bilateral trade agreement by autumn 2025 despite President Donald Trump’s announcement of 25% tariffs plus penalties starting August 1, people aware of the matter said on Wednesday.

In a brief statement, the commerce ministry said it had “taken note” of Trump’s statement and was studying its implications while reaffirming India’s commitment to a “fair, balanced and mutually beneficial” trade deal that protects farmers, entrepreneurs and small businesses.

“The government attaches the utmost importance to protecting and promoting the welfare of our farmers, entrepreneurs, and MSMEs,” the ministry said, adding that it “will take all steps necessary to secure our national interest, as has been the case with other trade agreements including the latest Comprehensive Economic and Trade Agreement with the UK.”

Indian officials and experts pushed back against Trump’s characterisation of excessive trade barriers, arguing that his focus on goods trade deficit ignores the broader economic relationship where the US earns tens of billions more annually from services, education, and defence deals, and cited New Delhi’s recent free trade agreements with developed economies such as Australia and the UK to demonstrate India’s willingness to open up its market with protections for its vulnerable populations .

People familiar with the negotiations said New Delhi expects Washington to follow Trump’s announcement with a formal letter that would be analysed and responded to appropriately. The Indian negotiating team – which has held five rounds of in-person discussions with its American counterparts -- will in the meantime continue talks for a balanced deal, they added.

One of the people aware of the matter pushed back against Trump’s characterisation of India as maintaining excessive trade barriers, citing the recently signed free trade agreements with other developed economies including Australia and the United Kingdom where tariffs on most items were slashed.

“Hence, President Trump’s generalisation that Indian tariffs are far too high, is not correct,” the person said. “FTAs are win-win, and not one-sided.”

The person highlighted Trump’s focus on goods trade surplus while ignoring broader economic ties, saying: “President Trump has said in a post on Truth Social – ‘We have a massive trade deficit with India!!!’ – which is just one side of the picture. Bilateral economic relationship is not only goods trade, it also includes trade in services, investments and other significant contributions to the US economy made by Indians.”

According to government data, India had a $41.18 billion trade surplus with the US in 2024-25, exporting goods worth $86.51 billion and importing $45.33 billion of American merchandise.

However, the people cited above argued this represented only a part of the bilateral relationship. The US gains significant revenue from financial, digital and e-commerce services, fees from students studying in America and defence deals, a second person explained.

“Such cooperation in services and contributions of Indians in American businesses have immense potential for further growth through BTA and other strategic cooperation, provided the US is not fixated with tariffs, and particularly with India’s sensitive sectors, which are vital for the survival of millions of Indian subsistence farmers,” the person added.

Ajay Srivastava, founder of Global Trade Research Initiative, said the US “quietly rakes in $80-85 billion every year from India through education, digital services, financial operations, intellectual property royalties, and arms sales.”

“These massive earnings don’t show up in the narrow goods trade statistics. When you factor them in, the US isn’t running a deficit with India at all, it’s sitting on a $35-40 billion surplus,” Srivastava added.

The second person aware of the matter said India was negotiating a comprehensive bilateral trade agreement that included not just goods but “other key sectors such as services, investments, non-tariff barriers, IPRs and customs facilitation.”

“We hope that a successful deal would help in balancing bilateral economic cooperation and prompt the Trump administration to remove reciprocal and punitive tariffs,” the person said.

Industry leaders expressed concern about the tariff announcement’s timing amid ongoing negotiations. Medical Technology Association of India chairman Pavan Choudary called Trump’s move “economically shortsighted and strategically misguided.”

“As a sovereign nation, India makes independent choices in defence and energy based on national interest and long-term strategic priorities. Attempting to punish these decisions through coercive trade measures is not only inappropriate but also counterproductive,” Choudary said.

Agneshwar Sen, trade policy leader at EY India, warned the 25% tariff could directly affect key sectors including marine products, pharmaceuticals, textiles, leather and automobiles where bilateral trade had been “especially robust.”

However, Sen remained optimistic about ongoing negotiations, noting both countries were “positively engaged” with the US team expected in India on August 24 for the sixth round of talks. “I am confident that, considering our shared interests and history of cooperation, the two sides will be able to address these contentious issues constructively,” he said.

Hindustan Times