India’s 9-Point Tariff Cut Proposal Sets Stage for Landmark US Trade Agreement

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India has taken a dramatic step in its ongoing trade talks with the United States, offering to reduce its average tariff deficit with the US below 4% from almost 13%. The nine-percentage-point cut is intended to earn exemptions from both existing and potential future American tariff increases, what could be one of the largest trade reforms in India's recent past.

Key Highlights

India's offer seeks to cut the average tariff gap with the US to below 4%, a significant reduction from the present 13%, in return for relief from current and prospective US tariffs.

The United States continues to be India's biggest trading partner, with bilateral trade amounting to around $129 billion in 2024. India has a present trade surplus of $45.7 billion with the US.

Part of the deal includes the elimination by India of charges on 60% of the lines of tariffs during the first phase of the deal, as well as preferential access being offered for around 90% of US imports. Among the tariff cuts included is lower tariff duty on high-value US items such as hydrocarbons, telecommunications equipment, airplanes' parts, luxury automobiles, electric vehicles, and liquor.

India also wants preferential access to the market for its major export industries, such as gems and jewelry, textiles, plastics, shrimp, horticultural products, and chemicals. It wants improved terms of trade for these products than those of America's other trading partners.

The offer is coming after President Donald Trump's government suspended the imposition of retaliatory tariffs-including a suggested 26% tariff on Indian exports-for 90 days to permit negotiations to advance. Nevertheless, a 10% base tariff still exists for the duration of the suspension.

India is insisting on being treated equally with major US allies like the UK, Australia, and Japan in key US strategic technology areas, such as semiconductors, artificial intelligence, telecommunications, biotechnology, and pharmaceuticals.

In an attempt to make the deal sweeter for Washington, India has promised to ease export restrictions on a range of valuable US items in an effort to persuade American negotiators to seal the deal.

This offer comes after Trump's recent "breakthrough agreement" with Britain, which cut the average tariffs levied on US exports entering the UK and could be used as a model for other trade deals.

A team of Indian officials is due to travel to the US later this month to push on with the talks, and India's commerce minister could be included in the negotiations.

If it is sealed, this agreement would redefine the landscape of trade between Indo-US, creating new possibilities for the two economies and establishing a precedent for future international trade deals.

Sources: Reuters, Times of India, Times Now, CNBC, MacDailyNews