India, US trade talks hit a speed bump

Hindustan Times

a day ago

The latest round of in-person trade negotiations between the India and US concluded in New Delhi on Tuesday with progress on multiple fronts but without significant breakthrough on tariff issues, people aware of the matter told HT, identifying recent 'protectionist' measures by Washington to slap 50% duties on steel and aluminium and its stance on the 10% baseline tariff on all imports as hurdles.
The extended six-day negotiation round, which saw the American delegation stay longer than initially planned, highlighted the complex nature of the discussions as both countries race to reach an agreement before the July 9 deadline when additional US tariffs are set to take effect.
An American negotiating team led by assistant US trade representative Brendan Lynch arrived in Delhi on June 4 to hold face-to-face negotiations with the Indian team led by special secretary Rajesh Agrawal. This was the fourth time the two sides met at one of the capitals and there was no announcement on Tuesday on whether they had set another in-person meeting.
Washington wants duty-free access for American goods, while India is willing to slash duties on most American products to near zero, provided the US reciprocates unequivocally, the people said, requesting anonymity because of sensitivities involved.
'The negotiations held with the US side were productive and helped in making progress towards crafting a mutually beneficial and balanced agreement including through achievement of early wins,' one person said.
India outlined three main tariff-related asks for forging an early harvest deal before July 9: the US withdraw its threat of imposing another 16% reciprocal tariff on Indian goods after July 8, repeal safeguard measures against Indian steel, aluminium, automobiles and auto components, and revoke the 10% reciprocal tariff on Indian goods imposed on imports from 57 countries from April 5.
'India is willing to substantially reduce its MFN rates for American goods through the proposed BTA to address its trade deficit concern. Ideally, the US should also reciprocate by reducing MFN rates. Least it could withdraw all additional tariff and non-tariff measures against Indian goods shipped to America,' a second person said.
According to World Trade Organisation rules, the Most Favoured Nation tariff is applicable to all its 166 members alike. Two countries can, however, reduce MFN rates under bilateral preferential trade arrangements such as free trade agreements.
While doubling safeguard duties on steel and aluminium to 50% over MFN rates under section 232 from June 4, the Trump administration spared the UK. For the UK, the levy remained at 25% because the two countries agreed to a US-UK Economic Prosperity Deal, the person said.
'Ideally, the US should also exempt India along with the UK because India was engaged with the United States for a bilateral deal much before President Trump's 'Liberation Day' tariff announcements on April 2,' this person added.
On April 2, Trump announced Liberation Day tariffs—a 10% baseline tariff on all imports effective from April 5 and country-specific reciprocal duties of 16% for India, which is suspended until July 8.
Indian exporters face practical difficulties under current US tariff structures. 'Indian goods, including handicraft items having parts made of steel or aluminium separately attract a 50% tariff. It is difficult to segregate metal components from any product and calculate two different tariff rates. This is an additional compliance burden, which also needs to be addressed through these talks,' one person said.
Like Washington, New Delhi is keen to conclude an early deal and forge a BTA, but it must be 'mutually beneficial' as agreed by Prime Minister Narendra Modi and President Donald Trump on February 13.
'Besides, the US' tariff measures are already under legal scrutiny. Although a federal appeals court reinstated the tariff measure, it is temporary. Even under Section 122 of the US Trade Act of 1974, the President has the authority to impose temporary tariffs or quotas for up to 150 days only. Any extension beyond that would require legislative approval,' the second person said.
Indian negotiators emphasised existing goodwill measures taken by New Delhi. 'Despite all these, India is not only willing to cut tariffs on the majority of American imports, but has also reduced duties on several items such as bourbon whiskey and motorcycles. It has already repealed the 6% Google Tax (equalisation levy) and recently approved entry of Elon Musk's satellite internet service Starlink. These are more than goodwill gestures and America must factor them while negotiating a trade deal with India,' the second person added.