India has proposed to reduce the average tariff gap with the USA from nearly 13% to below 4% in exchange for the Trump administration granting exemptions on existing and potential tariffs.
The average tariff rate in India is 17%, while in the USA it is 3.3%. If an agreement is reached, the tariff gap between the two countries will narrow by about 9 percentage points.
According to a report by Financial Associated Press on May 9 (edited by Zhao Hao), two sources revealed that India has proposed to reduce its average tariff gap with the USA from the current nearly 13% to below 4% in exchange for the Trump administration granting exemptions on existing and potential tariffs, and both parties are accelerating efforts to finalize a trade agreement.
The USA is India's largest trading partner. Data from the Office of the United States Trade Representative (USTR) indicates that the total bilateral trade volume in 2024 will be approximately 129 billion USD, with the USA exporting goods worth 41.8 billion USD to India and importing 87.4 billion USD, resulting in a trade deficit of 45.7 billion USD.
Additionally, a report from the Indian Council for Research on International Economic Relations (ICRIER) states that India's average tariff rate is 17%, while the USA's is 3.3%. If the latest news is confirmed, the tariff gap between the two countries will narrow by about 9 percentage points, making it one of India's most significant initiatives in reducing trade barriers.
In February, during a joint news conference held while Indian Prime Minister Modi visited Washington, Trump pointed out that it is 'difficult for the USA to sell products to India because they (India) have set up trade barriers and imposed very high tariffs.'
Last month, Trump announced equivalent tariffs on trade partners, with rates for India reaching up to 26%. Subsequently, the Trump administration suspended most tariffs for 90 days, but maintained a 10% baseline tariff, along with a 25% tariff on Autos, Steel, and Aluminum.
Earlier this week, the United Kingdom and USA reached an agreement on the terms of the tariff trade agreement, but the USA still retained the 10% baseline tariff. Media analysis suggests that maintaining the 10% baseline tariff may become a template for the USA in negotiations with other trade partners.
An Indian government official stated that after the United Kingdom, India and Japan are the next two countries expected to finalize agreements, "We will wait and see which country will reach an agreement first."
Two informed officials indicated that to achieve this goal, India has proposed to reduce tariffs on 60% of imported Commodity categories to zero in the first phase of the agreement. One official noted that India is also willing to provide "priority access" for nearly 90% of Commodities, including tariff reductions.
Another official mentioned that the Indian delegation might travel to the USA later this month to advance negotiations, and India's Commerce Minister Piyush Goyal may also be part of this visiting team. However, the official emphasized that the schedule has not been finalized.
In addition to tariff exemptions, India is also seeking priority market access from the USA in key export Industries, including Jewelry, Leather, Outfits, Textiles, Plastics, Chemicals, Oilseeds, Shrimp, as well as horticultural products such as Bananas and Grapes.
An official stated, "If India obtains priority market access, it would mean these Commodities could enjoy more favorable trade terms compared to other trade partners of the USA." The official added that to gain an advantage over competitors on specific "key products," India might also make relevant concessions.
However, India hopes that its exports to the USA can be completely exempt from tariffs, which conflicts with the retention of the 10% baseline tariff in the USA-UK agreement.
News officials stated that to make the agreement more attractive to Washington, India has proposed to relax controls on several high-value American export products, including aircraft and parts, luxury Autos and electric vehicles, telecommunications equipment, medical instruments, Oil & Gas products, wine and whiskey, plums, certain Chemicals, and Animal Fodder.
Beyond trade, India also hopes the USA will treat it on par with major allies like the United Kingdom, Australia, and Japan in key Technology sectors such as AI, telecommunications, biotechnology, pharmaceuticals, and Semiconductors.
Editor/Jeffy
