India Considers Lowering Taxes On US Imports, As It Tries To Manage Impact Of Reciprocal Tariffs: Report

The move, which would be one of India's most significant tariff reductions in years, seeks to minimise potential disruptions to its $66 billion worth of exports to the United States.

India is considering reducing tariffs on more than half of US imports, valued at $23 billion, as part of the first phase of a proposed trade deal aimed at countering the impact of upcoming US reciprocal tariffs, Reuters reported citing two official sources.

The move, which would be one of India's most significant tariff reductions in years, seeks to minimise potential disruptions to its $66 billion worth of exports to the United States.

According to an internal assessment by New Delhi, the new US tariffs, set to take effect on April 2, could affect 87 per cent of India's exports to the country. Citing the sources, the report revealed that India is open to cutting duties on 55 per cent of its current US imports, which currently face tariffs between 5 per cent and 30 per cent. Some of these tariffs could be substantially lowered or even eliminated entirely, the report added.

The United States currently maintains a trade deficit of $45.6 billion with India, while the World Trade Organization (WTO) estimates India's average trade-weighted tariff at 12 per cent, compared to America's 2.2 per cent.

Concerns Over Impact of Reciprocal Tariffs

During Prime Minister Narendra Modi’s visit to Washington in February, both nations agreed to begin trade discussions to address ongoing tariff disputes. India aims to finalise a deal before the reciprocal tariffs are imposed, with Brendan Lynch, Assistant US Trade Representative for South and Central Asia, leading a US delegation for negotiations starting Tuesday.

Indian officials emphasised that the tariff reduction depends on securing relief from the upcoming reciprocal duties. While a broad tariff cut is under discussion, alternative options include sector-specific adjustments or a product-by-product negotiation approach, the report stated citing one of the officials.

Additionally, India is exploring broader tariff reforms to reduce trade barriers across multiple sectors, though discussions remain in the early stages and may not immediately feature in the US-India trade talks, the report noted.

Pressure From US And Dos And Don'ts Of Tariffs

Despite Modi's early outreach to former US President Donald Trump after his election victory, the American President has repeatedly labelled India a “tariff abuser” and “tariff king,” maintaining a tough stance on trade policies.

New Delhi’s estimates indicate that tariffs on key exports such as pearls, mineral fuels, machinery, boilers, and electrical equipment—accounting for half of India’s exports to the U.S.—could rise by 6 per cent to 10 per cent under the new policy.

Pharmaceutical and automotive exports, valued at $11 billion, may face the most significant impact due to their reliance on the American market, the report stated. Alternative suppliers such as Indonesia, Israel, and Vietnam could benefit from these changes, it added.

To gain domestic political support, India has set strict boundaries for negotiations. Tariffs on meat, maize, wheat, and dairy products, which currently range from 30 per cent to 60 per cent, will remain unchanged, according to the report.

However, levies on almonds, pistachios, oatmeal, and quinoa may be reduced. Additionally, India may push for phased cuts to its automotive tariffs, which currently exceed 100 per cent, the news agency said.