U.S. Could Reach a Interim Deal to Lower India Tariffs below 20%

TMTPOST -- The Indian government could make a preliminary deal with the United States that allows the Trump administration give it the more favorable trade deal than peers in Asia and make more time to address key sticking points for a broader deal this autumn.

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The U.S. and India are working toward interim trade agreement that could see US tariffs on goods from India dip below 20%, Bloomberg reported Friday, citing people familiar with the matter. That tariff level, if achieved, would be lower than the 26% Trump proposed for India on April 2, a date U.S. President Donald Trump proclaimed “Liberation Day”, thus put the Southern Asian economy in a better position than its peers in the region, such as Vietnam.

It was said that the trade arrangement agreed by both sides will be announced through a statement, which would likely set a baseline tariff below 20% with language that would allow the two sides to continue negotiating the rate as part of the final pact. The interim agreement would reportedly give New Delhi space to resolve outstanding issues to hammer out a fuller deal by fall.

The interim deal, if finalized, is supposed to spare India amid Trump’s wave of letters dictating new tariffs starting August 1. Trump on Monday disclosed tariffs on 14 countries in a series of social media posts, hitting imports from Japan, South Korea, Kazakhstan, Malaysia,Tunisia, South Africa, Bosnia and Herzegovina, Indonesia, Bangladesh, Serbia, Thailand, Cambodia,Laos and Myanmar with tariffs ranging from 25% to 40%.

Trump on Wednesday posted letters to the leaders of eight countries on his social media platform Truth Social, informing all the goods imported from the Philippines, Brunei, Moldova, Algeria, Iraq, Libya, Sri Lanka and Brazil will face tariffs ranging from 20% to 50%, effective August 1. A day later, Trump announced in the letter that he would slap Canada with 35% tariffs, and said 15% or 20% blanket tariffs would be imposed on all the remaining countries.

Trump on Monday signed an executive order, delaying the tariff deadline on July 9,Wednesday, to August 1. That order effectively won more time for U.S.-India trade negotiations.

India was one one of the first trading partners that start negotiating with the Trump administration. Trump and his cabinet members had repeated they would make a deal with India soon, but talks so far still failed to remove all the hurdles as India is resisting opening up its agriculture and dairy industries while asking for a more favourable tariff for its goods entering the U.S. than those on countries like Vietnam. Recently, the outlook of a deal even got more dimmed as Trump issued new threat on BRICS.

BRICS is an intergovernmental organization that includes Brazil, Russia, India, China, South Africa, Saudi Arabia, Egypt, United Arab Emirates, Ethiopia, Indonesia and Iran. Trump in a social media post on Sunday warned that countries that align with “Anti-American” BRICS policies will face an additional 10% tariffs. “Any Country aligning themselves with the Anti-American policies of BRICS, will be charged an ADDITIONAL 10% Tariff. There will be no exceptions to this policy,” said Trump in the post.

Trump in a Cabinet meeting Tuesday reiterated his threat that nations join BRICS and engage in policy to reduce the dollar's dominance will soon face an additional tariff of 10%.

New Delhi last week suggested retaliatory tariffs against U.S. auto tariffs and on Wednesday proposed retaliatory tariffs against the U.S. under the World Trade Organization (WTO) over American tariffs on steel and aluminium.

India’s minister of trade industry, Piyush Goyal a week earlier cautioned the country is ready to make deals in the national interest, but not just to meet the deadline. “National interest will always be supreme. Keeping that in mind, if a good deal can be made, then India is always ready to make a deal with developed countries,” said Goyal when asked whether a deal could be made ahead of July 9, the previous deadline for reciprocal tariffs.

Reuters learned from an Indian trade official that a delegation from India is expected to visit the U.S. soon for trade talks as the two countries look to iron out disagreements over duties for auto components, steel, and farm goods.

Bloomberg reported on Friday that both U.S. and India have dug in their heels over a few key issues including Washington’s demand that India open its market to genetically modified crops — an ask New Delhi has rejected, citing risks to its farmers.

The two nations are yet to find a landing zone on contentious issues, including non-tariff barriers in agriculture and regulatory processes in the pharmaceutical industry, per the report.