MC EXCLUSIVE US Supreme Court ruling prompts India to reassess trade deal provisions

Under the agreement, US had agreed to cut tariffs on Indian goods to 18 percent from 50 percent imposed earlier

• India assesses US Supreme Court tariff ruling's trade impact
• US interim trade deal talks postponed for further review
• $34B of Indian exports may stay exempt from US tariffs

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The Central government is evaluating "all aspects" of the US Supreme Court ruling, which is why the talks around the interim trade framework have been deferred, a senior government official told Moneycontrol.

"I can't say what kind of an impact it will have on the ongoing negotiations with the US. We are studying the developments right now," the official said.

Another source aware of the development said that the government is looking at freshly negotiating some provisions of the trade deal – so that it can get an edge over other countries.

"The 18 percent tariff rate gave India a slight edge over its peers. But now since the global tariff rate imposed by US is 15 percent, the benefit is gone. Therefore, sectors under which India get can get more concession or exemption – via the trade deal -- is being assessed," the source said.

A three-day trade meeting between officials from New Delhi and Washington was scheduled to begin on February 23, to finalize the terms of the interim trade deal that was announced earlier this month.

Under the agreement, US had agreed to cut tariffs on Indian goods to 18 percent from 50 percent imposed earlier. Both sides had issued a joint statement that provided a clear path forward for further discussions before finalising the comprehensive deal.

However, post the US Supreme Court ruling -- which struck down Trump administration's reciprocal tariffs -- the Indian government is re-looking at the negotiations, the official said.

To be sure, the US top court ruling effectively ended all reciprocal tariffs. Meaning, the 18 percent rate reduced to zero.

On Friday, post the US Supreme Court's ruling, Trump imposed a 10% tariff on all countries, including India, effective February 24 for a period of 150 days. A day later, he announced that the rate would be raised to 15%.

At present, 15 percent tariffs are applicable on 55 percent of Indian exports to US – which total up to $48.4 billion. But sector-specific tariffs under separate national security provisions, such as Section 232 on steel and automobiles, remain in place, which amount to $8-9 billion.

$34-billion-worth exports exempt

Under the interim trade framework -- $34 billion of exports are likely to remain exempt from tariffs, as per a Moneycontrol Analysis.

The proposed tariff measures under Section 122 of the Trade Act of 1974, which allows the US president to impose duties of up to 15 percent for up to 150 days, reportedly preserve exemptions for pharmaceuticals and electronics while adding new carve-outs such as civil aviation products. These exemptions were under negotiation as part of the interim trade discussions between India and the US, scheduled for conclusion in March.

The exempted categories are pharmaceuticals, electronics and telecom equipment, petroleum products and engineering goods, along with civil aviation components.

According to the Factsheet of US-India interim trade framework, released on February 9, India will eliminate or reduce tariffs on all American industrial goods and a wide range of food and agricultural products, including dried distillers’ grains (DDGs), red sorghum, tree nuts, fresh and processed fruit, soybean oil, wine and spirits, and additional products.

India also intends to buy more American products and purchase over $500 billion of U.S. energy, information and communication technology, coal, and other products, says the factsheet.