India, US agree to cut tariffs via 'mutually-beneficial' trade deal: Source

During Prime Minister Narendra Modi’s meeting with US President Donald Trump, both sides agreed to scale up the size of their bilateral trade to $500 billion by 2030.

India and the US have agreed to cut tariffs on certain goods as part of the proposed mutually-beneficial trade deal between them, according to a senior Indian government official.

On February 13, India and US agreed on a new goal for bilateral trade – "Mission 500” – aiming to more than double total bilateral trade to $500 billion by 2030. In a bid to achieve this target the two sides also announced plans to negotiate the first tranche of a mutually beneficial, multi-sector Bilateral Trade Agreement (BTA) by fall of 2025.

Both sides also pledged to collaborate to enhance bilateral trade by increasing US exports of industrial goods to India and Indian exports of labor-intensive manufactured products to the United States as well as work together to increase trade in agricultural goods.

On whether the proposed bilateral agreement between India and US can be termed as a "mini trade deal", the official said that the negotiations will decide the expanse of the pace and it cannot be called a free trade agreement yet.

"During Trump 1.0, we had discussed a mini trade deal with the US, the understanding was it will be on MFN (Most Favoured Nation) principle. So we are not using the term mini trade deal this time around, we are going with bilateral trade deal. It is a much more fair agreement, which we will take forward," this official added.

These discussions were held during a meeting between US President Donald Trump and Indian Prime Minister Narendra Modi on February 13.

Negotiations for a mini trade deal was initiated during Trump’s first presidency. However, it was reportedly shelved by the Joe Biden administration.

The senior government official further said that US has not yet been announced reciprocal tariffs against any specific nations. “This step is basically seeing tariffs on US products versus products they import. We will see what to do when that happens,” the official added.

Trump's 'Fair and Reciprocal Plan' on trade - unveiled on February 13 just before the meeting with Prime Minister Modi - seeks to impose new levies on a country-by-country basis to rebalance trade relations.

While Trump has announced the plan for reciprocal tariffs, it is not immediately clear if US wants to impose these levies sector-wise or product-wise.

The US is India's top export destination, and its fourth-largest source of imports. Trump has often singled out India as a country with high tariffs and ‘hard to do business’ in.

On whether the bilateral trade deal between India and US will be used to counter the impact of US's reciprocal tariffs on India, the official clarified, "the Bilateral Trade deal has nothing to do with US's reciprocal tariffs."

While, the US's move on retaliatory tariffs is expected to hurt most of the major economies that run high deficits with America, the official said, "India is much lower in the hierarchy when it comes to US's trade deficit with India. They are more focussed on nations with whom they have much larger trade deficits such as China."

US runs the largest deficit with China, of around $300 billion, followed by Mexico at over $200 billion in 2023, as per World Bank data.

In comparison, US's trade deficit with India is at a much narrower $40 billion.