India seeks full exemption from 26 per cent additional tariff on domestic goods in interim trade deal with US
India and the US may announce an interim trade agreement before July 8, with New Delhi seeking full exemption from the additional 26 per cent tariff on domestic goods
New Delhi: India and the US may announce an interim trade agreement before July 8, with New Delhi seeking full exemption from the additional 26 per cent tariff on domestic goods, an official said.
The US on April 2 imposed an additional 26 per cent reciprocal tariff on Indian goods, but suspended it for 90 days till July 9. However, the 10 per cent baseline tariff imposed by America remains in place.
The government official said India’s endeavour to protect its sensitive sectors may entail some quota or minimum import price (MIP). Such sectors include agri goods and dairy.
Commerce and Industry Minister Piyush Goyal was there in Washington earlier this week to give impetus to the trade talks. He held meetings with US Trade Representative (USTR) Jamieson Greer and US Commerce Secretary Howard Lutnick. “Talks are moving positively. Before July 8, we are looking at concluding an interim deal before the first tranche. It will include goods, non-tariff barriers, and some areas of services such as digital. We are trying that the 26 per cent additional duty and the 10 per cent baseline tariff should not be there for India,” the official said, adding that India is seeking concessions for its labour-intensive sectors such as textiles and leather.
At present, the Trump administration requires approval from the US Congress to bring tariffs below the MFN (most favoured nation) rates. But the administration has the authority to remove the reciprocal tariffs imposed on a number of countries, including India.
India may look at certain commitments from the US on the duty concessions for its labour-intensive sector in the first tranche of the proposed bilateral trade agreement (BTA). Both countries have fixed a deadline to conclude the first phase of the pact by fall (September-October) of this year to more than double bilateral trade to USD 500 billion by 2030.
The minister-level meetings were followed by the deliberations between chief negotiators of the two countries, which will continue until May 22. Officials from New Delhi and Washington are looking to take advantage of the 90-day tariff pause window to advance the talks. The US has suspended the additional 26 per cent tariffs on India till July 9. It was announced on April 2 to bridge the widening trade deficit.
To boost bilateral trade, India is seeking duty concessions for labour-intensive sectors like textiles, gems and jewellery, leather goods, garments, plastics, chemicals, shrimp, oil seeds, chemicals, grapes, and bananas in the proposed pact with America.
On the other hand, the US wants duty concessions in sectors like certain industrial goods, automobiles (electric vehicles in particular), wines, petrochemical products, dairy, agriculture items such as apples, tree nuts and GM (genetically modified) crops.
While the import of GM crops from the US continues to remain a non-starter due to regulatory norms in India, New Delhi is open to import non-GM products like Alpha alpha hay (a kind of cattle feed).
The US has on multiple occasions raised concerns over certain non-tariff barriers being faced by American goods in the Indian markets. Whether another round of talks will happen on the proposed pact between the two countries, the official said, “We are trying to finalise things as early as possible.”
The US remained India’s largest trading partner for the fourth consecutive year in 2024-25, with bilateral trade valued at USD 131.84 billion. The US accounts for about 18 per cent of India’s total goods exports, 6.22 per cent in imports, and 10.73 per cent in the country’s total merchandise trade.
With America, India had a trade surplus (the difference between imports and exports) of USD 41.18 billion in goods in 2024-25. It was USD 35.32 billion in 2023-24, USD 27.7 billion in 2022-23, USD 32.85 billion in 2021-22 and USD 22.73 billion in 2020-21. The US has raised concerns over this widening trade deficit.
