India is exploring deeper tariff reductions, including zero duty on select agricultural imports, as part of efforts to enhance trade relations with the United States. The goal is to push bilateral trade to $500 billion by 2030, a target set during Prime Minister Narendra Modi’s recent discussions with US President Donald Trump.
Government officials, speaking on condition of anonymity, confirmed that India is open to slashing import duties across multiple sectors, including automobiles, chemicals, electronics, pharmaceuticals, and medical devices. This move aims to ease trade tensions and counter the perception that India imposes excessively high tariffs on American goods.
A delegation led by Commerce Minister Piyush Goyal is currently in Washington, negotiating key trade terms and highlighting India’s efforts to lower tariffs in recent years. For instance, the duty on high-end motorcycles was reduced from 110% to 100%, while American bourbon whiskey saw a tariff drop from 50% to 30%.
Additionally, India has expressed willingness to allow duty-free imports of a fixed quantity of lentils and peas from the US. This proposal mirrors an existing agreement with Australia, where India imports certain agricultural products at zero duty.
Countering the ‘High-Tariff’ image
Indian trade officials argue that the perception of India as a high-tariff economy is misleading. Data presented to US representatives shows that for over two dozen key American exports to India, the average import duty is just 3%, with high tariffs limited to a select few goods. This is part of a broader push to change the narrative and attract more trade and investment.
While India is willing to make concessions, officials have also pointed out areas where the US enjoys a trade surplus. By leveraging these sectors, India aims to strengthen its negotiating position. Experts, including Sachin Chaturvedi of the Research and Information System for Developing Countries, believe that India could use tariff hikes in certain areas to create room for better trade agreements.
Agriculture remains a sensitive issue
The Indian government has traditionally been cautious about opening up its agricultural sector, as millions of small-scale farmers depend on it for their livelihoods. However, discussions are ongoing about possible trade quotas and controlled imports to balance market needs while protecting domestic interests.
US Commerce Secretary Howard Lutnick, in a recent media interaction, emphasised that India must liberalise its farm sector and increase defence and energy imports from the US. He suggested that both nations could establish mutually beneficial trade quotas rather than imposing blanket tariffs.
Implications of tariff changes
India’s trade surplus with the US stands at approximately $41 billion, making it a potential target for retaliatory tariffs. Analysts predict that if the US raises tariffs by 15-20%, India’s total exports could shrink by 3-3.5%. To counter this, policymakers are also working on strategies to prevent an influx of cheap Chinese goods that could enter the Indian market under reduced tariff structures.
As trade talks progress, India’s approach remains strategic, balancing economic growth, international relations, and domestic sector protection while working toward a more favourable trade equation with the US.
