India eyes tariff cut on $23B of US imports to shield $66B in exports

According to government sources, India is considering cutting tariffs on over half of US imports, valued at $23 billion, to make a more lenient trade agreement with Washington. The move comes ahead of US President Donald Trump’s April 2 bound new reciprocal tariffs. 

These tariffs could shrink revenue from Indian exports, which totaled $66 billion to the United States last year. New Delhi hopes that easing its import duties will encourage Washington to release the tariff gas pedal for its exports. 

India seeks trade relief from Trump tariffs 

An undisclosed government analysis cited by Reuters estimates that the impending tariffs could affect 87% of India’s total exports to the US. Trump’s administration is using the policy to employ “fair trade” and reduce the American trade deficit with the South Asian country, which stood at $45.6 billion in 2023.

India is reportedly willing to reduce tariffs on 55% of US goods currently subject to 5% to 30% duties. Sources familiar with the discussions say New Delhi could “substantially” lower tariffs on several American imports and may even scrap duties entirely for some products.

Traditionally, India has maintained some of the highest trade-weighted import duties in the world, averaging 12% compared to just 2.2% in the United States. For the country’s stringent trade laws, President Trump repeatedly referred to it as a “tariff king” and a “trade abuser.”

Pharmaceuticals, automobiles, and more at risk

Indian officials stress that any tariff reductions on US imports must be accompanied by assurances of relief from Washington’s reciprocal tax policies. The impact of these tariffs would be particularly severe on industries that are heavily dependent on the US market.

New Delhi estimates that export categories, including pearls, mineral fuels, machinery, boilers, and electrical equipment, could see tariff hikes of 6% to 10%. These products account for nearly half of India’s exports to the US.

Pharmaceuticals and automobiles contribute around $11 billion in exports and could face the most disruptive impact. Still, some officials warn that this could benefit alternative suppliers such as Indonesia, Israel, and Vietnam, who are walking away from trading with India.

The Indian government has set boundaries for trade negotiations to gain political backing at home. Several high-tariff goods, such as meat, maize, wheat, and dairy products, which currently carry duties of 30% to 60%, are completely off the table for tariff reductions.

The nation is open to easing tariffs on select agricultural goods, including almonds, pistachios, oatmeal, and quinoa. The US government has been pushing for better market access for American agricultural products, and its Asian counterpart appears to be making limited concessions in this area.

Some businesses welcome tariff reductions

On Tuesday, Bloomberg featured Sanjeev Banga, the head of international business at Radico—one of India’s largest spirits manufacturers. Banga supports the tariff reductions, arguing that increased competition will ultimately benefit consumers. 

“I’m all for free-trade agreements and globalization because more competition helps the category grow,” Banga said. “If consumers like it, then let them make a choice.”

Radico uses imported Scotch whisky in its blending process, so lower tariffs would directly reduce costs. Moreover, reciprocal tariff reductions could make Radico’s own whiskey exports, such as the Rampur brand of single-malt, more competitive in foreign markets.

The Indian government is now asking businesses to prepare for a more open trade environment. Commerce Minister Piyush Goyal recently called on local exporters to “come out of their protectionist mindset” and confidently compete in the global market.

According to the BBC, India is actively pursuing free trade agreements with several other major economies, including the UK, New Zealand, and the European Union.

Indian telecom giants Reliance Jio and Bharti Airtel have recently partnered with SpaceX’s Starlink to introduce satellite internet services in the country. The deal has surprised industry analysts, owing to Elon Musk’s shaky relationship with both telecom startups. 

Musk, Trump’s “First Buddy,” has frequently bashed India’s regulatory environment and high import duties on electric vehicles. 

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