Impact of US Tariff Exemptions on India-US Bilateral Trade
Exporters argue that granting India tariff exemptions from the US could enhance bilateral trade. The FIEO supports this, citing that tariff imposition harms shipments. While negotiations for a trade pact are underway, analysts are skeptical about the likelihood of receiving exemptions safely due to Trump’s previous stances. The trade relationship is crucial as both countries aim for growth in various sectors.
Exporters emphasize that exempting India from the US’s pending reciprocal tariffs would significantly bolster bilateral trade. They argue that any tariffs on Indian goods could adversely impact shipments to the US. Reports indicate that US President Trump may soon implement automobile tariffs, potentially allowing some countries exemptions starting April 2.
The Federation of Indian Export Organisations (FIEO) asserts that India merits exemption from these tariffs due to its constructive engagement with the US and ongoing discussions for a Bilateral Trade Agreement. FIEO Director General Ajay Sahai highlighted that enhancing trade is essential to achieving the ambitious goal of increasing bilateral trade from approximately USD 200 billion to USD 500 billion by facilitating seamless commerce through tariff exemptions.
One exporter mentioned that exempting India from tariffs would eliminate uncertainties related to tariffs, leading to increased exports to the US. Meanwhile, the US has already established high tariffs on China. The Global Trade Research Initiative (GTRI) casts doubt on India’s likelihood of receiving exemptions, citing Trump’s continued labeling of India as a “high-tariff” nation. They warn that any exemption would require significant concessions from India beyond trade,
including easing market access for companies like Tesla and modifying the civil nuclear liability law.
India has begun discussions to scrap the equalization levy on digital services provided by tech giants such as Google. Ajay Srivastava of GTRI advises India to uphold its position on strategic matters. He stated, “If Trump imposes tariffs, so be it. India is not alone. The whole world is watching India… They are unsustainable and will eventually collapse under their own contradictions.”
Trade negotiations have commenced between US and Indian officials, with US Assistant Trade Representative Brendan Lynch meeting with Indian Commerce Department officials. The aim is to finalize an initial phase of the trade agreement by fall 2025, with the US pushing for market access for various goods while India seeks duty cuts for labor-intensive sectors like textiles.
In 2024, India’s main exports to the US included drug formulations (USD 8.1 billion) and telecommunications instruments (USD 6.5 billion), while major imports involved crude oil (USD 4.5 billion) and diamonds (USD 2.6 billion). These figures underscore the complex trade relationship that may be impacted by tariff changes.
The discussion surrounding tariff exemptions for India is crucial for enhancing US-India trade relations. While exporters advocate for exemptions to promote trade, analysts warn of potential stringent demands from the US government. The ongoing negotiations hold significant implications for various sectors in both countries, emphasizing the need for careful strategic considerations by India.
Original Source: www.livemint.com
