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India has offered significant reductions in its import tariffs on a range of goods in ongoing talks with the US. However, the country is adamant about maintaining high levies on sensitive agricultural commodities such as foodgrains and dairy products. The government of Prime Minister Narendra Modi is working diligently to secure a preliminary trade agreement with the US to avoid President Donald Trump’s threatened imposition of a 26 per cent “reciprocal tariff” on all Indian goods effective July 9.
According to sources familiar with the negotiations, there is a possibility of deep tariff cuts from India under the bilateral trade agreement. Still, this is contingent on achieving a balanced outcome for both parties. While specific details of the proposed tariff reductions on US goods are not yet disclosed due to the early stage of negotiations, India has shown flexibility on less sensitive farm products like almonds and oil and gas imports.
In recent trade pacts, India has agreed to cut tariffs on various products, including alcoholic spirits, cars, electric vehicles, car parts, and engineering goods. However, India’s offer falls short of President Trump’s expectations, who previously mentioned that India was willing to charge no tariffs at all.
Indian trade negotiators are firm on maintaining high duties on core agricultural commodities like wheat, rice, maize, and dairy products, which are vital sectors employing millions of Indians. On the other hand, India is pushing for reduced US tariffs on labor-intensive industries such as gems and jewelry, textiles, footwear, leather, and handicrafts. Additionally, Modi’s government is advocating for social security payment exemptions for Indian workers on short-term visas stationed in the US.
While the India commerce ministry declined to comment, the White House, US Commerce Department, and US Trade Representative have yet to respond to requests for comments. Trump previously postponed the reciprocal tariffs imposed on India for 90 days but retained a 10% import duty. India is now working towards a framework agreement with the US to increase bilateral trade to $500bn by 2030.
India’s protection of politically sensitive sectors like dairy in recent trade pacts underscores the importance of such industries in the country. With nearly 200,000 dairy co-operative societies and around 15 million members, dairy farming plays a significant role in India’s economy.
Both India and the US have large agriculture sectors, with India historically maintaining high tariff walls around agriculture. The Modi government’s sensitivity towards agriculture is evident, especially after facing backlash in 2021 over proposed agricultural reforms. In trade talks with the EU, India has similarly pushed to protect dairy and other sensitive farming sectors. However, negotiations with the US pose unique challenges, given the country’s status as India’s largest trading partner and President Trump’s criticism of India’s high import levies.
President Trump’s recent criticism of Apple’s plans to expand manufacturing in India highlights the complex dynamics of trade relations between the two countries. As negotiations continue, it remains to be seen how India and the US will navigate these challenges to achieve a mutually beneficial trade agreement.
