India and the United States are on the cusp of a major trade breakthrough as negotiations intensify in the final weeks of 2025. India's Commerce Secretary Rajesh Agarwal announced on Friday that the first tranche of the bilateral trade deal is expected to be signed by year's end, though he cautioned that trade negotiations rarely have rigid deadlines given the complexity of outstanding issues.

The context for these negotiations has been shaped by significant tariff tensions. President Trump imposed a 25 percent reciprocal tariff on Indian products starting in August, followed by an additional 25 percent increase targeting India's Russian oil imports. These moves fundamentally altered the negotiating landscape, pushing both nations toward two parallel tracks of discussion: a comprehensive bilateral trade agreement and an immediate framework trade deal specifically designed to address the high tariffs currently in place.

The disparity in tariff rates between the two nations is striking. While the average applied US tariff stands at just 5 percent, India's average tariff reaches 39 percent. However, some sectors show lower US rates, such as motorcycles at 2.4 percent. The framework agreement currently being negotiated will specifically address both the reciprocal tariffs and oil-related tariffs that have strained bilateral relations.

The broader bilateral trade agreement, formally introduced in February 2025, aims to transform the economic relationship between the two countries. Both nations have set an ambitious target to increase bilateral trade from the current 191 billion dollars to 500 billion dollars by 2030. This goal was first presented during Prime Minister Narendra Modi's visit to Washington earlier this year.

Despite the tariff tensions, momentum has not completely stalled. India's exports to the US actually surged by 18 percent during April through August 2025, reaching 40.39 billion dollars. Additionally, recent tariff relaxations have eased agricultural trade between the nations, decreasing the effective tariff rate by 0.6 percentage points to 12.8 percent in that sector.

Commerce Secretary Agarwal emphasized that while the two countries are close to a resolution, they will not rush the process. Finding the right landing zone for a complete elimination of reciprocal tariffs will require time and careful negotiation. The path forward depends on both nations balancing their domestic interests with the potential for deeper economic integration.

As we head into December 2025, listeners should watch for developments that could reshape US-India trade relations for the coming decade.

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