India-US Trade Talks Postponed: Review Underway After Tariff Changes

The high-level meeting between India and the United States to finalize the Interim Trade Agreement (ITA) has been postponed. According to government sources cited by PTI, the discussions were scheduled to take place in Washington from February 23 to 26. The postponement follows significant shifts in the US tariff structure, necessitating a comprehensive review of the previously negotiated terms by both nations.

Impact of Global Tariff Revisions on ITA

The postponement is primarily attributed to the recent changes in US global tariff policies. Under the proposed ITA framework, Indian goods were subject to an 18% tariff. However, following a US Supreme Court ruling that invalidated previous global tariffs, President Donald Trump introduced a new 10% global tariff, which was subsequently raised to 15% within 24 hours. Since the new global rate of 15% is lower than the 18% rate negotiated in the bilateral deal, both sides have decided to reassess the agreement to ensure alignment with the new economic reality.

Framework of the Proposed Trade Deal

Commerce Minister Piyush Goyal had previously outlined the framework of the deal, which aimed to Importantly boost bilateral commerce. 30 lakh crore) from the US over the next five years. In exchange, Indian agricultural products were to be exported to the US at zero tariff, while the deal also included a reduction in tariffs on Indian manufactured goods from 25% to 18%, alongside the removal of additional tariffs previously imposed due to oil purchases from Russia.

Discrepancy Between Negotiated and Global Rates

A point of contention has emerged regarding whether India will be subject to the negotiated 18% tariff or the new 15% global tariff. While President Trump stated in a press conference that the trade deal with India remains unaffected and will proceed as planned, reports suggest that countries with existing trade frameworks might benefit from the lower global rates under Section 122. If the 15% global rate is applied, it would represent a more favorable position for Indian exporters compared to the initially agreed 18%.

Strategic Benefits for Indian Exporters

The ITA is designed to provide Indian exporters with enhanced access to the $30 trillion US market. Key sectors such as generic pharmaceuticals, gems and jewelry, and aircraft parts are expected to benefit from zero-tariff provisions. On top of that, the agreement opens new opportunities for MSMEs and entrepreneurs in sectors including textiles, leather, footwear, organic chemicals, and handicrafts, while the deal also includes provisions for tariff rate quotas on certain auto components and improved regulatory terms for Indian generic drugs.

Protection of Sensitive Domestic Sectors

Throughout the negotiations, India has maintained a firm stance on protecting its sensitive agricultural and dairy sectors. According to official statements, products such as maize, wheat, rice, soy, poultry, milk, and cheese have been kept out of the tariff concession list to safeguard the interests of domestic farmers and rural economies. However, India has agreed to reduce or eliminate import duties on specific US products, including dried distiller grains, red sorghum for animal feed, fresh and processed fruits, soybean oil, and certain spirits.