Here’s why New Delhi did not rush into a deal with Washington

U.S. President Donald Trump on Wednesday announced 25% duties on imports from India and an unspecified “penalty,” but the country has so far appeared unfazed by tariff threats.

Even as the U.S. announced deals with other countries, such as with Japan that addressed sticking points on greater market access for American autos and agricultural products, India did not rush into an agreement.

The country has resisted larger market access for American agricultural products to protect its local farmers, who form a sizable voting bloc. In its trade deal with the U.K., signed last week, India managed to safeguard its most sensitive agricultural sectors from tariff concessions.

India is not “backing off” because their exports to the U.S. constitute a small part of their economy and it cannot afford to open its agricultural sector to U.S. companies, said Carlos Casanova, senior economist at UBP. America’s goods imports from India totaled $87.4 billion in 2024, according to U.S. government data.

India’s Commerce and Industry Minister Piyush Goyal in an interview with CNBC last week signaled that the relaxing entry barriers for the sector could be a problem.

“We are always very sensitive to the interests of our farmers, the interests of our [Micro, Small, and Medium Enterprises], and will ensure that our areas of concern are well protected,” Goyal said.

He reportedly said Sunday that India does not negotiate its trade agreements based on deadlines, and while a deal was preferable, New Delhi would put its national interest first. “I am fully confident that by the October-November 2025 timeline, we will secure a good agreement,” Goyal said, according to The Economic Times.

“India may give in a little bit, but the chances of that are not very bright, because India’s red lines are very clear in agriculture, especially genetically modified foods and dairy, there is no scope for, you know, moving back,” Jayant Dasgupta, India’s former ambassador to the World Trade Organization, told CNBC.

Harsha Vardhan Agarwal, president of the Federation of Indian Chambers of Commerce & Industry said in a statement that while the U.S. duties would impact India’s exports, “we hope that this imposition of higher tariffs will be a short-term phenomenon and that a permanent trade deal between the two sides will be finalised soon.”

Analysts told CNBC before the latest tariff announcement that Washington had good reasons to finalize an agreement sooner rather than later with India.

“Strategically, the U.S. has little interest in alienating India. It sees India as a strong partner that can shape the Indo-Pacific landscape,” Harsh V. Pant, Vice President of Studies and Foreign Policy at Observer Research Foundation, told CNBC.

Bringing manufacturing back to the U.S., especially from China, has been a central tenet of Trump’s economic policy.

As the Trump administration is largely focused on countering China’s arrival on the global stage, India represents a potential alternative to China in global manufacturing, analysts told CNBC.

“We still expect India to remain a beneficiary of the China plus one strategy, as diversification is a bigger driver of this trend,” market research firm Asia Insight said in a note.

India’s role in managing this great power rivalry “very, very, critical,” said Pant.

As America “positions itself against China’s reach into global supply chains,” shifting manufacturing to India becomes a natural “compromise”, and might even complement the shift back into the U.S.,” Vishnu Varathan, head of economics and strategy at Mizuho Bank, said.

For example, the U.S. could control some of the higher end of the manufacturing chain, which requires more technology and skilled labor, while India “complements it with cheaper labor,” Varathan added.

In doing so, India might be able to “cut China out and position the U.S. more strategically,” all while walking the diplomatic tightrope, added Varathan.

India’s role in the BRICS, a group of 10 emerging economies, which includes Brazil, Russia, India, China and South Africa, could also give New Delhi “a degree of flexibility in U.S.-India deals,” Observer Research Foundation’s Pant said.

According to the Carnegie Endowment for International Peace, the bloc aims to challenge Western-led global economic institutions and reduce the dominance of the U.S. dollar in the global economy.

On July 6, U.S. President Donald Trump threatened an additional 10% tariff on countries that align with the “Anti-American…