Introduction

The trade relationship between India and the United States has been a significant pillar of economic cooperation between the two nations. The ongoing trade agreement talks aim to strengthen this bond, ensuring mutual benefits while safeguarding India's interests. Commerce and Industry Minister Piyush Goyal recently stated that the discussions are progressing well and will be advantageous for both countries.

Tariffs and Their Impact

Tariffs are import duties imposed and collected by the government, paid by companies to bring foreign goods into a country. The US has been advocating for reciprocal tariffs on its key trading partners, including India, arguing that India imposes high tariffs on American goods. The US has already implemented import duties on China, and starting April, higher duties will also be applied to India. Key tariff implementations include:

1. A 25% tariff on steel and aluminum imports from March 12.

2. A 25% tariff on completely built vehicles (CBUs) and auto parts, effective April 3.

These tariffs have created uncertainty among Indian exporters, who are seeking exemptions to minimize their impact on business operations.

Key Developments in Trade Talks

A team of US officials, led by Assistant US Trade Representative for South and Central Asia Brendan Lynch, is currently in India for a three-day negotiation on the proposed bilateral trade agreement. Both nations aim to conclude the first phase of the agreement by the fall of 2025 (September-October) and have set an ambitious target to increase bilateral trade to USD 500 billion by 2030, up from the current USD 190 billion.

The US has demanded greater market access in sectors such as industrial goods, automobiles, wines, petrochemical products, and select agricultural commodities. On the other hand, India is advocating for tariff reductions in labor-intensive industries like textiles.

India-US Trade Snapshot

Top Indian Exports to the US (2024)

1. Drug formulations, biologicals: USD 8.1 billion

2. Telecom instruments: USD 6.5 billion

3. Precious and semi-precious stones: USD 5.3 billion

4. Petroleum products: USD 4.1 billion

5. Gold and other precious metal jewelry: USD 3.2 billion

6. Ready-made garments of cotton: USD 2.8 billion

7. Products of iron and steel: USD 2.7 billion

Top US Imports to India (2024)

1. Crude oil: USD 4.5 billion

2. Petroleum products: USD 3.6 billion

3. Coal, coke: USD 3.4 billion

4. Cut and polished diamonds: USD 2.6 billion

5. Electric machinery: USD 1.4 billion

6. Aircraft, space crafts and parts: USD 1.3 billion

7. Gold: USD 1.3 billion

Indian Industry’s Concerns and Government Measures

Indian industries have expressed concerns about the reciprocal tariffs, fearing that they may severely impact their competitiveness. To ease trade tensions, India has taken proactive measures:

1. Reducing import duties on bourbon whiskey from 150% to 100%.

2. Lowering tariffs on certain wine varieties.

3. Eliminating the equalization levy on major tech giants like Google.

4. Announcing customs duty reductions on motorcycles and synthetic flavoring essences, which would benefit American exporters.

US Agricultural Exports to India

The US is pushing India to open its agriculture sector to American businesses. In 2024, US agricultural exports to India amounted to USD 1.6 billion. Key exports included:

1. Almonds (in shell): USD 868 million

2. Pistachios: USD 121 million

3. Apples: USD 21 million

4. Ethanol (ethyl alcohol): USD 266 million

Conclusion

The India-US trade negotiations are progressing with the aim of achieving a fair and mutually beneficial agreement. While the US seeks greater market access, India is prioritizing the protection of its domestic industries. The coming months will be crucial in shaping the trade dynamics between the two nations, influencing future economic cooperation and growth.