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India Considers Major Tariff Cuts to Avoid U.S. Reciprocal Taxes
India may cut tariffs on over half of U.S. imports worth $23B to prevent Trump's reciprocal tariffs. Talks begin soon, but key sectors remain off-limits. Will a deal be struck in time?
ND
by News Desk
2025-03-25
India Considers Major Tariff Cuts to Avoid U.S. Reciprocal Taxes

In a bid to prevent the impact of U.S. President Donald Trump's reciprocal tariffs set to take effect from April 2, India is considering slashing import duties on more than half of U.S. goods worth $23 billion. The move, which would be India’s largest tariff reduction in years, is part of ongoing trade negotiations between the two nations.

Negotiations and Key Trade Concerns

According to government sources, India estimates that 87% of its total exports to the U.S., worth $66 billion, could be affected by Trump's tariffs. To mitigate this, New Delhi is open to reducing or even eliminating duties on 55% of U.S. imports currently facing tariffs of 5% to 30%.

While India is willing to make substantial tariff concessions, officials insist that the final decision hinges on securing relief from U.S. reciprocal taxes. Talks will be led by Assistant U.S. Trade Representative for South and Central Asia Brendan Lynch, who is set to visit India this week.

However, the decision is not final, with discussions still underway about sector-specific adjustments instead of sweeping cuts. Additionally, India is exploring long-term tariff reforms to lower trade barriers across multiple sectors, though such measures may not be part of the immediate negotiations.

Trump's Hardline Approach on Tariffs

Despite Prime Minister Narendra Modi's diplomatic efforts—including his visit to Washington in February—Trump has remained firm in his stance against India’s trade policies. The U.S. president has repeatedly labeled India a "tariff king" and vowed not to exempt any country from tariffs.

India’s analysis suggests that key export sectors, including pearls, mineral fuels, machinery, and electrical equipment, could face tariff hikes of 6% to 10%. The pharmaceutical and automotive industries, which heavily depend on the U.S. market, are expected to suffer the most disruption.

If new tariffs take effect, alternative suppliers such as Indonesia, Israel, and Vietnam could benefit at India’s expense.

India’s Red Lines in Trade Talks

To ensure political viability, India has set clear limits on tariff reductions. Officials have ruled out cuts on meat, maize, wheat, and dairy products, which currently face tariffs ranging from 30% to 60%. However, reductions on almonds, pistachios, oatmeal, and quinoa are under consideration.

Additionally, India plans to negotiate phased reductions in its automobile tariffs, which exceed 100% in some cases.

India’s delicate balancing act was evident in recent comments by Trade Secretary Sunil Barthwal, who assured a parliamentary committee that while India values its trade relationship with the U.S., it will not compromise on national interests.

Will India Make Sweeping Tariff Cuts?

While some analysts believe Trump’s pressure could push India toward broad tariff reductions, others remain skeptical. Milan Vaishnav, a South Asia expert at the Carnegie Endowment for International Peace, noted that Modi’s government has historically been reluctant to enact the kind of cuts Trump is demanding.

"It is possible that external pressure from the Trump administration could lead to politically costly, across-the-board cuts," Vaishnav said. "But I am not holding my breath."

With the deadline for new U.S. tariffs fast approaching, India must navigate a complex trade landscape to protect its exports while maintaining its economic and political priorities. The outcome of the upcoming negotiations will determine whether the two nations can reach a compromise or if a trade confrontation is inevitable.

 
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