Essential India-US Trade Discussions This Week: Is New Delhi Anticipating a Complete Reversal of April 2nd Tariffs?
India and US Intensify Trade Negotiations
India and the United States are ramping up efforts to finalize an interim trade agreement by the end of June, aiming to avert new US tariffs of 26 percent on Indian exports and to achieve a complete reversal of the tariff increases that were enacted on April 2. Officials from both nations are gearing up for significant negotiations in New Delhi to solidify this interim trade deal.
Upcoming Negotiations in New Delhi
Face-to-face discussions regarding the bilateral trade agreement are set to proceed this week, with the US delegation expected to arrive on June 5 or 6. Both countries are targeting a conclusion by the last week of June, just before the 90-day suspension of US reciprocal tariffs expires on July 8. India is particularly keen to evade the imposition of an additional 26 percent tariff on its exports.
The Context of the New Tariff
This 26 percent tariff was announced by former US President Donald Trump on April 2 as part of his reciprocal tariff strategy. The interim deal is deemed vital to prevent these tariffs from being implemented.
Promising Prospects for Export Growth
In a recent statement, Commerce and Industry Minister Piyush Goyal expressed optimism about the progress being made in the Bilateral Trade Agreement (BTA) with the US during the Annual General Meeting of the Confederation of Indian Industry (CII) last week. India hopes that this agreement will provide a much-needed boost to its struggling goods exports. The Finance Ministry’s latest economic report suggests that the US deal could turn “headwinds into tailwinds” for outbound trade. Rajesh Agrawal, India’s chief negotiator, mentioned, “Although there are only a few areas of competition, there are many areas where we can complement each other. A successful trade agreement could define a strong partnership in this arena.”
India’s Stance on Tariffs
According to sources from Bloomberg, India is pushing for the complete elimination of all tariffs introduced on April 2, as well as the 10 percent baseline duty that Trump imposed on trading partners. Earlier this month, during a meeting with US Commerce Secretary Howard Lutnick, India’s plea for a full rollback was rejected. However, India’s resolve appears to be strengthening, influenced in part by recent legal challenges to Trump’s tariff policies in US courts.
Controversy Over Domestic Value Addition
India also intends to counter the US demand for a 60 percent domestic value addition requirement in the trade deal. Instead, it is advocating for a lower threshold of approximately 35 percent. A representative from the Ministry of Commerce and Industry did not immediately respond to a request for comment from Bloomberg.
Progress in Negotiations So Far
The initial trade talks aimed at completing the first phase by autumn; however, the sudden imposition of reciprocal tariffs in April led both countries to refocus on achieving a quicker interim agreement. Over recent months, three in-person meetings have taken place—two of which were conducted by India and one by the US in March. Rajesh Agrawal noted that discussions are on the right track, saying, “Despite the challenges, I am hopeful we will navigate through and achieve positive outcomes sooner rather than later.”
Impact of Legal Pressures on Tariff Policies
Most of Trump’s international tariffs were deemed illegal by a US trade court last week, although a federal appeals court later placed a brief hold on this ruling. This legal ambiguity is affecting how countries, including India, approach trade discussions with the US. Kevin Hassett, Director of the US National Economic Council, recently stated that India is among the nations closest to finalizing a trade agreement. Nonetheless, it remains uncertain whether Trump will consent to remove the 10 percent baseline tariff. Earlier in the month, he indicated that he would “always” impose a minimum 10 percent duty on trading partners but mentioned there “could be an exception.” Notably, this baseline tariff was retained in the US–UK trade deal.
Continuing Talks Amidst Tensions
Indian officials are closely monitoring the legal developments in the US while continuing their planned negotiations. The forthcoming visit from the US trade team is anticipated to advance discussions further. Prime Minister Narendra Modi’s administration has made various concessions regarding trade and immigration to maintain momentum. Earlier, New Delhi proposed a deal structured in three phases, aiming for at least an interim agreement before the upcoming July deadline.
India’s Increasing Assertiveness
Even before the recent US court rulings, India had begun adopting a more assertive negotiating posture. Following China’s resistance to Trump’s tariffs, India also hinted at imposing retaliatory duties on specific US goods in response to tariffs on steel and aluminum. Additionally, there is a growing dissatisfaction in New Delhi regarding Trump’s application of trade as leverage in foreign policy, particularly his attempts to link trade agreements with ceasefire discussions between India and Pakistan.
