Trump’s April 2 reciprocal tariff threat sets deadline for India to work out deal

Trump said these countries may also face non-monetary barriers.

With the D-day less than a month away, New Delhi needs to speed up its offers to the US on immediate tariff cuts on certain short-listed items, which may include luxury cars, electronics, solar cells and chemicals. This could buy India some time for a more elaborate India-US bilateral trade agreement (BTA).

Commerce & Industry Minister Piyush Goyal is in Washington DC where he is expected to start talks on the BTA, discussed by Trump and Prime Minister Narendra Modi last month, and work out a deal to avoid retaliatory tariffs as well as the steel and aluminium levies set to be imposed on March 12. “The government has reportedly prepared a list of items where India could offer substantial tariff cuts, which may include luxury cars, electronics, solar cells and chemicals, among others,” a source tracking the matter said. Unlike some others, such as China and Canada, that have threatened retaliation, India would want to settle matters through bilateral engagement as the US is its largest export market, the source added. In FY24, bilateral trade was valued at $119.7 billion while India’s exports were at $77.51 billion.

 In his speech, Trump said the EU, China, Brazil, India, Mexico and Canada, and countless other nations, charged the US tremendously higher tariffs than they were charged, and it was very unfair. He specifically mentioned India’s automobile tariffs stating that the levies were higher that 100 per cent.

India’s tariffs are higher than the US on most products with a 6.5 percentage point differential on average. 

Tariff cuts on automobiles, a move that could appease Trump, was a definite possibility. “Indian auto industry has come a long way and is established now.. it’s time industry becomes more competitive so that it can enhance and invest in technology,” said Puneet Gupta, Director, Sales and Powertrain Forecast, India & ASEAN, S&P.

In fact, India could propose eliminating tariffs on a whole lot of industrial products by identifying tariff lines where duty cuts won’t harm domestic industries, referencing its past FTA offers to Japan, Korea and ASEAN.

This could work if the tariff cuts are offered only to the US packaged as an agreement on goods but if offered on a Most Favoured Nation (MFN) basis to all countries, the domestic industry could take a big hit.

In agriculture, while highly sensitive items such as dairy and poultry are a no-go area, there is scope to reduce tariffs in soyabean oil, lentil and apple, say industry experts.

*Trump says reciprocal tariffs will charge countries whatever they charged the US; *India singled out for charging the US auto tariffs higher than 100%; *India’s tariffs higher than US on most products, including agri, pharma, textiles; *Scope for tariff cuts on auto, other industrial products to appease US. *Sensitive farm products like poultry, dairy could be non-negotiables.