The commerce ministry, which will steer negotiations for the India-US Bilateral Trade Agreement (BTA), will soon send out a checklist to the ministries of defence, electronics and information technology, consumer affairs, agriculture, education, mines, steel, heavy industries, science and technology, and labour, the people cited above said on the condition of anonymity. The exercise aims to align New Delhi’s tariffs better with the US duty structure, they said.
“A checklist identifying products for tariff balancing would be sent to various ministries. Their inputs will play a key role in discussions with US authorities during negotiations on the terms of reference for the BTA,” one of the four people cited above said.
The plan aims to address US concerns over high tariffs on certain product lines to create a more balanced trade environment. India is also pushing for mutual tariff reductions in the upcoming BTA, as reported by Mint. This follows the reciprocal tax plan announced by US President Donald Trump, aimed at imposing similar tariffs on product lines where disparities exist.
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However, the inputs sought are only for negotiations, and do not mean India will make policies to favour US firms, the person cited above said, adding policy changes will come from both sides.
Countering tariff challenges
India has already taken several tariff measures on items under Trump’s scrutiny. Import duty on motorcycles was cut from 50% to 30%, ethernet switches from 20% to 10%, and bourbon whiskey from 150% to 100%. Mint reported on 15 February that India plans to counter Trump’s reciprocal tariffs plan with data to show that most imports from the US into India have duties less than 10%.
Apart from looking into tariff measures, the commerce ministry has also tasked the Department for Promotion of Industry and Internal Trade (DPIIT) to simplify procedures further in specific sectors to boost foreign direct investment (FDI), the second person added.
India’s backchannel discussions with the US, in coordination with the external affairs ministry, helped it avoid the first wave of US tariff action that hit Canada, Mexico and China. New Delhi is concerned about the impact of reciprocal tariffs on its key exports to the US including engineering goods, textiles, pharmaceuticals, and electronics. India exports over 7,300 commodities to the US, including gems and jewellery, pharmaceuticals, textiles, engineering goods, organic chemicals, IT services, automobiles, agricultural products and metals.
Queries emailed on Friday to spokespersons of the ministries of commerce, external affairs and other departments mentioned above remained unanswered.
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“We are discussing possible policy changes, if needed, to support firms, including those from the US, that see India as a preferred investment destination,” the third person said. Discussions around the proposed changes are focused on making compliances such as quality control orders (QCOs) more investment-friendly, this person said.
India’s QCOs have rankled a range of countries, who see them as a non-tariff barrier shut out their products. Several countries, including the US, have raised 35 specific trade concerns (STCs) over the years at the World Trade Organization regarding India’s quality control orders.
However, India has defended these measures, stating they aim to conduct market surveillance, prevent deceptive practices and protect human, animal, or plant life and health.
“Some ministries have also been tasked with reviewing policies to facilitate research collaboration with US research institutions,” said the fourth person.
The US is India’s largest trading partner, and it is also one of the few countries with which India had a trade surplus in 2023-24. India’s major exports to the US include electrical and engineering goods, electronic goods, gems and jewellery, pharmaceutical products, light crude oil and petroleum.
India-US trade
India’s merchandise exports to the US have been on an upward trajectory. In FY22, exports were valued at $75.6 billion, and this increased to $78.3 billion in FY23, demonstrating a strengthening trade relationship. Although FY24 saw a slight dip to $77.5 billion—primarily due to supply chain disruptions—the long-term trend remains positive.
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In FY24, bilateral trade between India and the US stood at a record $118.2 billion as against $128.8 billion in FY22. In FY24, India had a trade surplus of $36.8 billion with the US.
Of the total trade in FY24, Indian exports to the US stood at $77.5 billion, while American exports to India stood at $40.7 billion. The US is India’s third largest investor, with cumulative FDI inflows of $65.2 billion from April 2000-March 2024.
“If implemented, the reciprocal tariff plan, announced on 13 February by the Trump administration, could significantly impact Indian exports, as it allows the US to increase tariffs on countries with a trade surplus,” said Ajay Srivastava, founder of Global Trade Research Initiative (GTRI).
Major items exported from India to the US include engineering goods ($17.6 billion), electronic goods ($10 billion), gems and jewellery ($9.90 billion), drug formulations and biologicals ($8.72 billion, petroleum products ($5.83 billion), and ready-made garments including accessories ($4.71 billion), among others in FY24.
Trump, who took office on 20 January, imposed a 25% tariff on Mexican and Canadian imports, a 10% duty on Canadian energy products, and a 10% increase in tariffs on Chinese imports, fulfilling a key campaign promise and escalating trade tensions.
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However, the tariffs on Mexico and Canada were put on hold until 4 March following discussions, while China has challenged the US tariffs at the WTO.
On 10 February, Trump announced a 25% tariff on all steel and aluminium imports, set to take effect on 12 March, eliminating previous exemptions and quota arrangements. Further, the US on 18 February announced its plan to impose a 25% tariff on pharmaceutical imports.
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