Blitz Bureau
In a bid to counter the effects of impending US reciprocal tariffs set to take effect on April 2, India is considering lowering tariffs on more than half of US imports, amounting to around $23 billion.
The measure aims to safeguard India’s $66 billion worth of exports to the US from these duties. However, the proposed tariff reductions depend on the US offering relief from its planned levies. Key industries, such as pharmaceuticals and automobiles, face significant risks, though certain agricultural products may be exempt from the cuts.
This move is a response to the broader global tariff policy set to be enforced by the US next week, which has unsettled international markets and raised concerns among several nations, including US allies. In light of this, India is taking proactive steps to lessen the potential economic fallout.
A US trade delegation led by Assistant US Trade Representative Brendan Lynch was in New Delhi last week for talks with Indian officials. The discussions focused on establishing a fairer trade framework and potentially finalising a bilateral agreement. The visit highlighted both countries’ commitment to resolving trade disputes and strengthening economic cooperation.
At the heart of these talks was a broader vision: finalising the first phase of a trade agreement by the third quarter of 2025 and expanding bilateral trade from the current $200 billion to a projected $500 billion by 2030. Tariff reductions and market access in key sectors — particularly agriculture and industrial goods — are among the primary areas of discussion.
In a move to bolster local manufacturing and enhance export competitiveness, India has announced the removal of import duties on various goods essential for producing electric vehicle (EV) batteries and mobile phones. This decision aligns with broader tariff reduction strategies to help domestic producers navigate the anticipated US tariffs.
Furthermore, an Indian parliamentary committee has advised the Government to lower tariffs on imported raw materials. This recommendation aims to support local manufacturers and address ‘inverted duty’ structures, where raw material tariffs exceed those on finished goods, potentially putting domestic producers at a disadvantage.
An internal Government analysis indicates that a staggering 87 per cent of Indian exports to the US could be affected by the new US tariffs. To avoid this fallout, Indian officials are open to reducing tariffs on 55 per cent of American imports currently taxed at rates between 5 per cent and 30 per cent. Some levies might see substantial reductions, while others could be abolished entirely. However, the proposal remains under discussion, and no final decision has been made. Alternative strategies are also on the table including sector-specific tariff adjustments and selective reductions for particular products rather than sweeping cuts across industries.
Agriculture remains one of the most challenging aspects of the negotiations. While both nations recognise the importance of cooperation, bridging the gap between their interests has proven difficult. Indian policymakers are under pressure to lower tariffs on imported raw materials, a move that could enhance local manufacturing and align with US demands for reduced trade barriers.
Trade bodies in India have put forth their recommendations to strengthen economic ties. The Federation of Indian Export Organisations (FIEO) has highlighted key growth sectors such as apparel, electronics, toys, footwear, and organic chemicals, advocating for increased Government support in promoting Indian products in the US Ajay Sahai, FIEO’s Director General, has called for financial aid under the Market Access Initiative (MAI) scheme to help Indian businesses participate more actively in American trade expos.
For India’s engineering sector, the US tariffs on steel and aluminium are a pressing concern. The Engineering Export Promotion Council (EEPC), representing over 10,000 small exporters, has urged the Government to consider lowering import duties on US goods such as steel scrap, nuts, castings, and forgings. They argue that such concessions could pave the way for reciprocal trade benefits from the US.
The road ahead is fraught with challenges. Will this moment mark a turning point in Indo-US trade relations, or will entrenched positions derail progress? As the deadline nears, both nations must decide: embrace compromise or risk economic confrontation. The world is watching as two of the largest economies navigate a defining moment in their trade history.
