NEW DELHI: The stand the US is taking in its negotiations with key partners suggest that even if an interim trade agreement with India gets finalised, Indian exports will still be subject to duties that are higher than those that prevailed prior to introduction of reciprocal tariffs on April 2 while New Delhi will end up significantly reducing import duty for American imports, according to a report.
The US had imposed 26% extra duties on Indian imports as part of reciprocal tariff plan and through an interim trade deal India is trying to avoid them. Indian officials are currently in Washington negotiating the deal and conclude it before the pause of reciprocal tariffs ends on July 8. US President Donald Trump on Thursday hinted at a big trade deal with India.
“Instead, a 10% baseline tariff may apply to most imports from India — but the US will not lower its own Most Favoured Nation (MFN) tariffs on Indian exports. This means Indian goods will continue to face higher tariffs (MFN+10%) in the US, while US exports enter India at reduced or zero duties — raising questions about reciprocity,” a report by the founder of Global Trade Research Initiative (GTRI) Ajay Srivastava said.
This was the deal that was offered to the UK and was accepted, leading to the only trade deal that the US has finalised after Trump unveiled reciprocal tariffs on all its trade partners. The 10% baseline tariffs stay on UK’s exports to the US but tariffs on steel and aluminium have been removed. The UK has also agreed to increase purchases of US agriculture products and cut import duties on 2.500 items. “The more likely outcome is a limited trade pact — styled after the U.S.-UK mini trade deal announced on May 8,” GTRI said.
In return for a cut in reciprocal tariffs, India is expected to cut MFN tariffs on a wide range of industrial goods, including automobiles, a persistent demand from Washington, the report said.
In agriculture, India may offer limited market access through tariff reductions and tariff-rate quotas (TRQs) or limits on select US products such as ethanol, almonds, walnuts, apples, raisins, avocados, olive oil, spirits, and wine.
“However, India is unlikely to budge on sensitive sectors. No tariff cuts are expected for dairy products or key food grains like rice and wheat, where farm livelihoods are at stake. These categories are politically and economically sensitive, affecting over 700 million people in India’s rural economy,” Srivastava added.
Beyond tariffs, the US is expected to press India for large-scale commercial purchases — including oil and LNG, civilian and military aircraft from Boeing, helicopters, and nuclear reactors. There may also be pressure on India to ease FDI restrictions in multi-brand retail — potentially benefiting firms like Amazon and Walmart — and to liberalise rules on remanufactured goods, currently subject to stringent import norms.
This “mini-deal,” if concluded, would therefore focus on tariff reductions and strategic commitments, leaving broader FTA issues — including services trade, Intellectual Property Rights, and digital regulations — for a future negotiation, Srivastava said.
Source: The Financial Express
