India seeks exemption from US' 10% baseline tariff
The fate of the 10% baseline tariffs that the Trump administration invoked on imports from all countries on April 2 is among the issues now at the heart of negotiations between New Delhi and Washington as they attempt to hammer out an early tranche of the trade deal, people aware of the matter have said.
Delhi is not in favour of replicating, as suggested by the American negotiators, the approach in the trade deal struck between the US and the UK, where British goods are still subject to the baseline tariffs, these people added.
According to a person with direct knowledge of the discussions, Indian negotiators are pushing for their American counterparts to remove the baseline 10% rate as well as commit to assurances that the additional 16%, due to be implemented on July 9, will be left off.
An American negotiating team led by assistant US Trade Representative Brendan Lynch 4 landed in Delhi on June for what is the fifth time negotiators from either side have gone to the other's capital for face-to-face talks. The American delegation is expected to be in Delhi till June 10, longer than the previously expected two-day visit.
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'Ideally, both the 10% baseline tariff on Indian goods and the additional 16% from July 9 must end simultaneously after an interim deal is signed. Else, India will also have rights to continue proportionately similar tariffs on American goods till the time the US withdraws the entire 26% reciprocal tariff,' one of them said, citing a joint statement by the two countries' leaders issued on February 13 in Washington.
While expounding 'Mission-500' to double bilateral trade to $500 billion by 2030 on February 13, the two leaders – Prime Minister Narendra Modi and President Donald Trump – in their joint statement mentioned the need for new 'fair-trade terms' that are 'mutually beneficial', the person said.
A second person aware of the matter corroborated India's stance: 'Only a mutually beneficial deal would have a long life'.
'Both India and the US are sovereigns. One is the oldest democracy and the other is the largest democracy. While the US is the largest economy, India is the fastest growing major economy of the world. Hence, the deal must be balanced, equitable, fair and acceptable to their people,' the first person said.
The second person added that India sees trade interests between both nations as being 'complementary and not competitive', hence New Delhi is open to giving greater market access to the American goods in the Indian market provided Washington reciprocates.
'The trade negotiations continue in New Delhi covering all these matters in a constructive manner as we speak and both sides are hopeful for a win-win,' he said.
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After UK industries faced American tariffs of 25% on all aluminium, steel and derivatives (announced on March 12), 25% tariff on passenger vehicles (announced on April 3), 25% tariff on automobile parts (beginning May 3), and a 10% baseline tariff on all imports (from April 5) – the UK and the US on May 8 announced an economic prosperity deal (EPD). The mini deal secured some concessions for the UK, but the 10% baseline tariff continued.
Both partners are racing to conclude an interim, or regarded as an 'early harvest', deal before July 9, which will be followed by a wider first tranche of Bilateral Trade Agreement (BTA) by September-October 2025.
After that a comprehensive BTA will be negotiated, they said.
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The current negotiations for an early harvest deal involve greater market access for goods by eliminating tariffs and non-tariff trade barriers, and improving supply chain integration, they said.
The current New Delhi round is followed by a face-to-face negotiation between the two teams in the US. During that period, Union commerce and industry minister Piyush Goyal was also in the US from May 17-22 where he held meetings with his counterparts, US commerce secretary Howard Lutnick and USTR Jamieson Greer.
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