India watchful as US drives hard bargain on trade deal

India wants extension of tariff pause for balanced BTA
| Photo Credit:
egromov

The US is driving a hard bargain with India in the ongoing bilateral trade agreement (BTA) negotiations resisting commitment on a full rollback of the reciprocal and sector-specific levies while raising its own demands on market access and coverage, sources have said.

“With the US playing hard ball, India is now weighing if there is merit in a wait and watch approach to see what other countries achieve in the trade pacts they are negotiating with the US. If we agree to a deal and then realise that another country secured more tariff cuts, it would not be desirable,” a source tracking the development told businessline.

Eyeing further extension

New Delhi is hoping for a further extension of the 90-day pause period for reciprocal tariffs, beyond July 9, to give more time for a balanced deal to emerge, the source said.

It is not clear to India under what terms the US would remove the reciprocal tariff threat and roll back the 10 per cent baseline tariffs that are affecting bottomlines and orders.

“The demands made by the US on tariffs are stiff and include steep tariff cuts across sectors including automobiles, motorcycles, medical equipment, processed food and a plethora of agricultural items, some of which are politically difficult to touch because of economic sensitivities,” the source said.

Additionally, the US wants other areas to be also included in the deal such as digital trade, standards and government procurement, and their goal posts are continuously shifting, the source added.

Trump tariff

On April 2, US President Donald Trump announced reciprocal tariffs on most trade partners with trade surpluses. India got slapped with 26 per cent tariffs, while its competitors such as Vietnam, Bangladesh and Indonesia were hit with higher levies.

Most of these tariffs, except a baseline of 10 per cent, were paused for a 90-day period to give time to countries to strike trade pacts with the US.

“While the reciprocal tariff threat and the baseline tariffs already applied are big impediments to business, Trump’s sector specific tariffs on steel & aluminium, which have now been increased to 50 per cent, are also hurting exports significantly,” the source said.

In fact, no new orders are being placed or sought now for engineering goods that have been affected by the 50 per cent tariffs, as neither buyers, sellers or consumers can absorb the steep levies, according to EEPC India.

The US has not yet given any assurance about addressing the full reciprocal tariffs and sector specific tariffs, including on steel and auto, the source said.