Indian officials have reportedly offered a dramatic reduction in tariffs across the board in exchange for relief from President Donald Trump’s tariffs in order to complete a bilateral trade agreement.
Indian sources told Reuters the proposal would reduce the average tariff differential between Indian and U.S. exports from 13 percent to four percent. As of 2023, the World Trade Organization (WTO) calculated India’s average tariff as 17 percent, while the average U.S. tariff was only 3.3 percent.
India plans to achieve this by reducing duties on U.S. imports to zero on some goods and giving “preferential access” to almost 90 percent of imports from the United States. Aircraft, cars, telecommunications equipment, medical equipment, wines, and animal feed would be among the American products that would enjoy looser import restrictions under the deal.
India, in turn, wants preferential access for its most important exports to America, including jewelry, apparel, textiles, chemicals, and produce. New Delhi also desires more access to advanced U.S. technology, especially computer chips, artificial intelligence (A.I.), and pharmaceuticals.
India currently runs a $45.7 billion trade surplus with the United States, its largest trading partner. The Trump administration has criticized such large trade differentials as evidence of unfair treatment by other countries. In India’s case, Trump announced a 26 percent tariff to resolve the trade deficit, piled on top of a ten percent “base tariff” applied to most other countries.
The president put the tariff increases on hold for 90 days last month. India was one of the countries that appeared most eager to work out a major trade agreement before the 90-day exemption expires.
The Indian officials who spoke to Reuters said India and Japan are jockeying to be next in line for a deal behind the United Kingdom, which announced the first post-tariff trade deal with the United States this week.
Bloomberg News reported last week that the bilateral deal could include “zero-for-zero” tariffs up to a certain limit on steel, auto components, and pharmaceuticals. The U.S. also wants India to lift some quality control standards on imported medical devices and chemicals that American manufacturers consider opaque and unfair.
CNBC quoted analysts who said India still tends to have a protective mindset toward domestic businesses, but it wants to strike a bilateral deal quickly and resolve the tariff dispute so it can secure American market access for its goods and begin attracting the kind of global investment it needs to reach its ambitious growth targets.
CNBC’s analysts found the rumored “zero-for-zero” proposal remarkable because India has been very reluctant to slash its tariffs so dramatically.
Some of them found the specific goods mentioned in Bloomberg’s report to be unlikely candidates for zero-tariff swaps, since the transportation costs for importing American steel are very high, and top-of-the-line U.S. pharmaceuticals are too expensive for the average Indian consumer, even with tariffs eliminated.
Meanwhile, American auto manufacturers have difficulty penetrating the Indian market because low-end consumers prefer what Matthews Asia portfolio manager Peeyush Mittal described as “cheap Indian vehicles” made by companies like Tata Motors, while buyers in the upper income brackets prefer luxury vehicles from BMW and Mercedes.
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