New Delhi: The chances of reaching an interim trade agreement between India and the United States before the August 1 deadline set by Washington have diminished, as discussions remain stalled over tariff reductions on essential agricultural and dairy products, according to two sources from the Indian government.

In April, US President Donald Trump threatened to impose a 26 percent tariff on Indian imports but delayed its implementation to facilitate negotiations. This pause will conclude on August 1, yet India has not received a formal tariff notification, unlike more than 20 other nations.

The Indian trade delegation, headed by chief negotiator Rajesh Agrawal, returned from Washington after a fifth round of discussions without achieving any significant progress.

“An interim agreement before August 1 appears challenging, although virtual talks are still in progress,” one of the Indian government sources stated, noting that a US delegation is anticipated to visit New Delhi shortly to further the negotiations.

Negotiations are at an impasse as New Delhi is unwilling to liberalize its politically-sensitive agriculture and dairy sectors, while Washington is opposed to India’s request for relief from elevated tariffs on steel, aluminum, and automobiles.

Officials are considering whether these matters can be postponed to a later phase, following an interim agreement, according to the second Indian official.

Ajay Sahai, director general of the Federation of Indian Export Organisations, cautioned that sectors such as gems and jewellery could suffer significantly if the 26% tariffs are enacted.

“Nonetheless, this situation may be temporary, as both nations are striving to finalize the agreement over time,” he remarked.

US Treasury Secretary Scott Bessent informed CNBC on Monday that the Trump administration prioritizes the quality of trade agreements over their timing.

When asked if the deadline could be extended for countries currently in negotiations, he indicated that the decision rests with Trump.

Indian officials remain optimistic about securing a more comprehensive agreement by September or October, in accordance with the understanding reached by Prime Minister Narendra Modi and Trump in February.

“Considering that five rounds of negotiations have taken place and another US delegation is anticipated, we are hopeful about concluding a trade agreement,” stated a third government source.

The sources asked to remain anonymous since the negotiations are confidential.

The Indian commerce ministry and the US Trade Representative’s Office did not promptly reply to emailed inquiries for comments.