India is considering a significant reduction in tariffs on over half of the $23 billion worth of U.S. imports as part of ongoing trade negotiations with the United States, according to two government sources. This move is intended to counteract U.S. President Donald Trump’s reciprocal tariffs that are set to be implemented on April 2, which have caused concern in global markets and among policymakers worldwide, including Western allies.
Internal assessments by the Indian government suggest that such U.S. tariffs could impact 87% of India’s $66 billion in exports to the U.S. To mitigate this, India is willing to lower tariffs on 55% of U.S. goods currently subject to tariffs ranging from 5% to 30%, potentially eliminating tariffs on some goods entirely, said the sources, who preferred to remain anonymous as they were not authorized to speak publicly.
Neither India’s trade ministry, the prime minister’s office, nor a government spokesperson responded to requests for comments. According to the World Trade Organization, the U.S. maintains a trade-weighted average tariff of about 2.2%, while India’s stands at 12%. The U.S. currently faces a $45.6 billion trade deficit with India.
During a visit by Prime Minister Narendra Modi to the U.S. in February, both countries agreed to initiate discussions aimed at swiftly reaching a trade agreement and resolving tariff disputes. India hopes to finalize a deal before the announcement of reciprocal tariffs, with Assistant U.S. Trade Representative for South and Central Asia, Brendan Lynch, leading a delegation for trade talks starting Tuesday.
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Indian officials have indicated that the decision to cut tariffs on more than half of U.S. imports depends on obtaining relief from the reciprocal tariffs. The proposal is still under discussion, with alternatives such as sector-specific tariff adjustments and negotiations on individual products being considered. Broader tariff reforms are also under discussion but are in the early stages and might not play a role in upcoming talks with the U.S.
Despite Modi’s early support following Trump’s election, the U.S. president has labeled India a “tariff abuser” and “tariff king,” insisting on the imposition of tariffs. New Delhi anticipates tariff increases of 6% to 10% on items like pearls, mineral fuels, machinery, boilers, and electrical equipment due to the reciprocal tax, both sources reported.
The reciprocal tariffs could most significantly impact India’s $11 billion pharmaceutical and automotive exports, potentially benefiting alternative suppliers such as Indonesia, Israel, and Vietnam. To ensure political support within India, the government has established clear boundaries for negotiations.
Certain tariffs on meat, maize, wheat, and dairy products, currently ranging from 30% to 60%, are non-negotiable, according to a third government official. However, tariffs on almonds, pistachios, oatmeal, and quinoa might be reduced. Furthermore, India intends to advocate for gradual reductions in automobile tariffs, which currently exceed 100%.
India’s cautious approach to tariff negotiations is reflected in comments made by its trade secretary to a parliamentary committee on March 10, as well as remarks from U.S. Commerce Secretary Howard Lutnick. Sunil Barthwal, addressing the committee, emphasized India’s desire to maintain its trade relationship with the U.S. without compromising national interests.
Howard Lutnick urged India to “think big” following the reduction of tariffs on high-end motorcycles and bourbon whiskey earlier this year. Milan Vaishnav, a specialist in South Asian politics and economics at the Carnegie Endowment for International Peace, commented, “The Modi government has so far shown little interest in sweeping tariff cuts, but external pressure from the Trump administration might prompt broader reforms.”
Everyday Relevance
The potential tariff reductions and trade negotiations between India and the United States could have several direct impacts on everyday life:
- Consumers could see reduced costs on imported U.S. goods, including electronics and machinery, if tariffs are lowered or removed.
- Indian exporters might experience increased competition from alternative suppliers gaining advantage due to U.S. tariffs on Indian goods.
- Businesses reliant on U.S. imports may face changes in operational costs, influencing their pricing and economic strategies.
- Individuals working in the pharmaceutical and automotive sectors could be most affected, facing job security challenges as these sectors confront significant tariff impacts.
- Tariff adjustments could influence the availability and pricing of certain everyday goods, such as food items and consumer products, impacting daily expenses.
