To secure US trade deal, key ministries told to list what they can bring to talks table

Indian Express

2 days ago

FOLLOWING US President Donald Trump's tariff sledgehammer, the government has kicked off an exercise to thrash out concessions across sectors that can be offered in the tariff negotiations later this month. Key economic ministries have been asked to see what they can still afford to offer to sweeten New Delhi's deal when the US team is here on August 25.
To reach an agreement, the Trump administration has been demanding much more than what the government has offered in its market access commitments, including lowering of tariffs across the board and removal of non-tariff trade barriers.
As policymakers grapple with Trump's announcement of a 25 per cent tariff on goods from August 7, alongside an additional but unspecified 'penalty' for its defence and energy imports from Russia, economic ministries have started sending in sectoral tariff concessions in their jurisdictions.
There are indications oil refiners have started reducing Russian oil purchases. Some of these concessions, if calibrated well, could ensure an opening up of the domestic economy, sources aware of discussions at the highest levels told The Indian Express. In fact, it was an external crisis that had forced the reforms of 1991.
Most importantly, the sources said, an unnecessary show of bravado in countering some of Trump's assertions, however ridiculous they may be, should be avoided.
India was one of the first countries the Trump administration had expected to sign a deal with, but slow progress has been a source of frustration for Washington DC. Like countries around the world scrambling to deal with Trump's tariff threats, India had largely adopted a principled, but non-confrontational, stance in an attempt to balance selective concessions with caution to safeguard its economic growth, and circumvent a backlash from domestic producers.
Sources closely tracking the US talks with others said a majority of the countries that rushed to sign deals with the world's biggest economy ended up with lopsided agreements that effectively extracted more than what it gave. This includes the UK and Australia that have a trade deficit with the US.
On talks with New Delhi, US Treasury Secretary Scott Bessent told CNBC Thursday: 'Well, I don't know what's going to happen; it will be up to India. India came to the table early. They have been slow-rolling things, so I think that the President, the whole trade team is frustrated with them. And also, India has been a large buyer of sanctioned Russian oil, that they then resell as refined products. So, they have not been a great global actor'.
The assumption in New Delhi has always been that Washington DC will maintain a differential of 10-20 per cent in tariffs between China and India; and that the Americans would be cognizant of India's traditional redlines that have endured for decades, including concerns over GM food crops and the need to safeguard the interest of the vast subsistence-level manufacturing base that has an oversized contribution to labour-intensive exports.
The government is also keen to stay away from offering duty concessions on imports of agri items such as soybean, corn and dairy, in the interim deal. While the government has offered to cut tariffs on 55 per cent of US imports, this could be pushed up in the upcoming talks, given that in FTAs with Japan, Korea, and ASEAN, over 80 per cent of tariff lines were down to zero.
Sources said the outer limit for a deal with the US, currently pegged at around October, could be brought forward, if fresh negotiations are positive. What complicates the equation for India is that the Chinese are at an advanced stage of negotiations towards a deal, which could have a favourable tariff rate and potential waivers on secondary tariffs, including possibly the tariff on account of Russian oil imports and the proposed 10 per cent BRICS tariff.
China is currently faced with a 30 per cent tariff. From New Delhi's perspective, a deal needs to be clinched precisely for ensuring the gap in tariffs between India and China is maintained, even with a limited early-harvest type of deal.
There is, however, greater receptiveness now within the policy circles to cut tariffs on some industrial goods, especially intermediate goods where there is the twin problem of high duties and an inverted duty structure (duty being higher on inputs than on final products).
Alongside, there is a willingness to grant concessions in sectors such as public procurement and agri provided these are matched by the other side, like in the case of the UK deal. Also, India is willing to import more from the US, especially in three big-ticket sectors – defence equipment, fossil fuels and nuclear – to manage Trump's constant references to the trade gap, the sources said.
Tariff rebalancing, if done right, could potentially offer an impetus to the economy, given that the biggest beneficiaries of tariff protection, especially the non-tariff barriers such as an increasing array of QCOs (quality control orders), are the big players. MSME units have been calling for these QCOs to be removed, especially in areas such as steel and textiles.
Since 1991, New Delhi has gradually reduced its average tariff from nearly 79 per cent in 1990 to around 12 per cent in 2013, following which it has gone back up to 16-17 per cent by 2023. Sectors such as agriculture, dairy and automobiles, continue to be protected, even as the Ministry of Commerce and industry maintains that its trade measures are WTO compliant.
Unlike its response during Trump's first term, where retaliatory tariffs were imposed, New Delhi has desisted from retaliating and is working on strategic concessions in sectors that the US is keen to target, while adhering to its own broad red lines. This involves areas symbolic of trade openness, including nuclear energy, fossil fuels and defence procurement.
Think tanks such as Delhi-based Global Trade Research Initiative have said that by refusing to cross its red lines, particularly on agriculture, India has helped avoid 'the trap of a one-sided deal'.
Once the official level discussions wrap up, there is a sense that a final call on the deal could come down to a conversation between the two leaders, Prime Minister Narendra Modi and Trump. This is especially so since it is Trump who is the trade negotiator-in-chief. For India, the best-case scenario would be to get a deal of some sort now, and then build on that in the future negotiations that could run into 2026, experts said. With Trump announcing the tariffs and penalties on India, that phone call could come in sooner, they said.
Anil Sasi is National Business Editor with the Indian Express and writes on business and finance issues. He has worked with The Hindu Business Line and Business Standard and is an alumnus of Delhi University. ... Read More