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Investing.com - A comprehensive trade agreement between India and the U.S. could provide a boost to the South Asian nation’s exports and manufacturing sector, potentially fueling sustained economic growth, Bloomberg Economics has said.
Media reports have said the two countries have been pushing this week to forge a deal before the expiration of a pause to President Donald Trump’s punishing "reciprocal" levies on July 9. Trump threatened to slap a 26% tariff on Indian imports into the U.S. in his "Liberation Day" event at the White House in early April, but these were temporarily brought down to 10% to allow for negotiations to proceed.
However, both sides have remained at odds over U.S. dairy and agriculture, Reuters reported, citing people familiar with the talks. Indian negotiators are not willing to compromise on the issues, the news agency said, adding that New Delhi feels it is unacceptable to lower levies on genetically-modified corn, soybeans, wheat, and rice grown in the U.S.
A broad pact may nearly double India’s export of goods to the U.S. within a decade, while gross domestic product would be expanded by 0.6%, Bloomberg Economics predicted. Overall, exports including services to the U.S. would jump by 64%, they said, adding that most of the gains would come from textiles and light manufacturing goods like furniture and toys.
On the other hand, should no deal be forged and India end up facing the 26% tariffs, the country could lose more than a third of its exports to the U.S. and GDP would be dented by 0.7%, Bloomberg Economics said.
Along with discussions with India, the White House has been engaging with a number of other countries prior to Trump’s tariff delay deadline. So far, the White House has notched limited framework trade deals with China, the United Kingdom (TADAWUL:4280), and, earlier this week, Vietnam.
With China and Vietnam likely to incur higher U.S. tariffs, a trade deal with India could turn the country into a more attractive draw for businesses looking to diversify or move their supply chains, Bloomberg Economics argued.