To protect the sectors expected to face the brunt of reciprocal tariffs, India may push for more agricultural and textile exports through the proposed bilateral trade deal with the United States, a senior government official said.
US President Donald Trump, who has on several occasions expressed displeasure over “high” Indian tariffs, plans to “soon” impose reciprocal tariffs on countries such as India and China. While warning of tariffs, a plan for which is in the works, Trump has also talked of a trade deal with India.
"The idea is to protect Indian exports from the impact of tariffs...so basically, the trade deal with the US is the answer and we plan to ensure that the deal is beneficial for us and our interest will be to push for agriculture, textiles, aluminium and steel (exports to the US)," the official told Moneycontrol.
Mission 500
On February 13, during Prime Minister Narendra Modi's trip to the United States, India and the US agreed on a new goal – "Mission 500” – aiming to more than double the bilateral trade to $500 billion by 2030.
The two sides also announced plans to negotiate the first tranche of a mutually beneficial, multi-sector Bilateral Trade Agreement (BTA) by the fall of 2025.
Bilateral merchandise trade between India and the US stood at $82.53 billion as of April-November of the current fiscal year.
While India's agricultural goods exports to the US stood at $6.04 billion in the calendar year 2024, outbound shipments of textiles and clothing were at $10.8 billion.
According to a second government official, India is waiting for the appointment of the US Trade Representative (USTR) and once the American negotiating team is in place, both sides will initiate talks in the next few weeks to decide on the nature of the proposed trade agreement.
“The US and India have agreed to move in the direction of mutually beneficial and fair BTA that takes care of everything, whatever they announce (in terms of reciprocal tariffs). We will have a mutually beneficial trade agreement," the second official said.
Both officials spoke on condition of anonymity as they are not authorised to speak to the media.
The BTA shield
India is hoping BTA would shield Indian exports from US President Donald Trump's “fair and reciprocal plan” trade, which seeks to impose new levies on a country-by-country basis.
While textiles face the highest tariff differentials between India and US, making them vulnerable, Indian farm exports may be hit hardest, with shrimp, dairy, and processed foods facing duties of up to 38.2 percent, think-tank Global Trade Research Initiative (GTRI) said in a note.
The US currently imposes tariffs ranging from 15 percent to 35 percent on Indian labour-intensive exports such as textiles.
"If the US decides to impose separate tariffs, the additional tariff for farm products would be 32.4 percent. Indian farm exports to the US currently face a 5.3 percent tariff, whereas American farm exports to India face a much higher 37.7 percent, creating a 32.4-percent gap," GTRI added.
To be sure, India has already taken steps to enhance market access for US agricultural products like alfalfa hay and duck meat, while America has facilitated measures to increase exports of Indian mangoes and pomegranates.
While initial steps to enhance agricultural trade were taken during the Biden administration, the recent efforts to further expand market access for products like alfalfa hay, duck meat, mangoes, and pomegranates have been made after Trump took office on January 20.
On February 13, both sides also pledged to enhance US exports of industrial goods to India and Indian exports of labour-intensive manufactured products and steps to increase trade in agricultural goods.
"We have our own studies on reciprocal tariffs. We (India) have to be prepared for reciprocal tariffs. Either it is going to make our exports more competitive or we look at other markets," the first official said, adding the country is hoping that if the US lowers its reliance on steel and aluminium from China, New Delhi may benefit.
"Aluminium, steel exports may be hit due to US reciprocal tariffs. If they (the US) stop importing from China, then our steel will definitely become more competitive," this official said.
According to a Moneycontrol analysis, Trump’s plan to impose a 25 percent tariff on all steel and aluminium imports into America could threaten nearly $1 billion worth of Indian exports. The levy kicks in early next month.
While India’s steel exports to the US are minor, the aluminium industry faces a bigger threat, as the United States accounts for nearly 12 percent of the country’s exports.
India's exports of products of iron, steel and base metals to the US stood at $5.4 billion in 2024.
The US is India's top export destination and its fourth-largest source of imports.
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