India eyes tariff cut on US$23 billion of US imports, to shield US$66 billion in exports: sources
New Delhi wants to mitigate the impact of US President Trump’s reciprocal worldwide levies set to take effect from Apr 2
[NEW DELHI] India is open to cutting tariffs on more than half of US imports worth US$23 billion in the first phase of a trade deal the two nations are negotiating, two government sources said, the biggest cut in years, aimed at fending off reciprocal tariffs.
India wants to mitigate the impact of US President Donald Trump’s reciprocal worldwide tariffs set to take effect from Apr 2, a threat that has disrupted markets and sent policymakers scrambling, even among Western allies.
In an internal analysis, New Delhi estimated such reciprocal tariffs would hit 87 per cent of its total exports to the United States worth US$66 billion, two government sources with knowledge of the matter told Reuters.
Under the deal, India is open to reducing tariffs on 55 per cent of US goods it imports that are now subject to tariffs ranging from 5 per cent to 30 per cent, said both sources, who sought anonymity.
In this category of goods, India is ready to “substantially” lower tariffs or even scrap some entirely, on imported goods worth more than US$23 billion from the US, one of the sources said.
India’s trade ministry, the prime minister’s office and a government spokesperson did not reply to mail seeking comments.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
Overall, the US trade-weighted average tariff has been about 2.2 per cent, data from the World Trade Organization shows, compared with India’s 12 per cent. The US has a trade deficit of US$45.6 billion with India.
During Prime Minister Narendra Modi’s US visit in February, the two nations agreed to start talks towards clinching an early trade deal and resolving their standoff on tariffs.
New Delhi wants to strike a deal before the reciprocal tariffs are announced, and Assistant US Trade Representative for South and Central Asia Brendan Lynch will lead a delegation of officials from the US for trade talks from Tuesday.
The Indian government officials warned that cutting tariffs on more than half of US imports hinges on securing relief from reciprocal tax.
The tariff-cut decision was not final, with other options under discussion such as sectoral adjustments of tariffs and product-by-product negotiations rather than a wide cut, said one of the officials.
India is also considering wider tariff reform to lower barriers uniformly, but such discussions are in early stages and might not figure immediately in talks with the US, said one of the officials.
Even though Modi was among the first leaders to congratulate Trump on his election victory in November, the US president has continued to call India a “tariff abuser” and “tariff king”, vowing not to spare no nation from tariffs.
New Delhi estimated increases of 6 per cent to 10 per cent in tariffs on items such as pearls, mineral fuels, machinery, boilers and electrical equipments, which make up half its exports to the US, due to reciprocal tax, both sources said.
The second official said that the US$11 billion worth of pharmaceutical and automotive exports may see the most disruptive impact due to reciprocal tariff, given their dependence on the US market. The new tariffs could benefit alternative suppliers like Indonesia, Israel and Vietnam, the official added.
To ensure political acceptance by Modi’s allies and the opposition, India has set clear red lines for the negotiations.
Tariffs on meat, maize, wheat and dairy products that now range from 30 per cent to 60 per cent, are off the table, a third government official said. But those on almonds, pistachio, oatmeal and quinoa may be eased.
New Delhi will also push for phased cuts in automobile tariffs, now effectively more than 100 per cent, a fourth official said.
India’s tightrope walk on the matter was highlighted by comments its trade secretary made to a parliamentary standing committee on March 10 and remarks by US Commerce Secretary Howard Lutnick.
India did not want to lose the US as a trading partner, Sunil Barthwal told the committee, but vowed at the same time, “We will not compromise on our national interest,” according to two people who attended the closed-door meeting.
Lutnick asked India to “think big” after it cut tariffs on high-end motorcycles and bourbon whiskey this year.
“To date, the Modi government has shown little appetite for sweeping tariff cuts of the kind Trump is seeking,” said Milan Vaishnav, an expert on South Asian politics and economy at the Carnegie Endowment for International Peace think-tank. “It is possible the Modi government could use external pressure from the Trump administration to enact politically costly, across-the-board cuts, but I am not holding my breath.”
Share with us your feedback on BT's products and services
