India Focuses on Quick Foreign Trade Agreements (FTAs) to Mitigate Trump’s Tariff Impact
India Focuses on Quick Foreign Trade Agreements (FTAs)
India is gearing up to tackle the fallout from US President Donald Trump’s aggressive tariff policies by leveraging foreign trade agreements (FTAs). These agreements, which reduce customs duties between partner countries, are seen as a crucial tool to minimize the economic impact of escalating tariffs on Indian exports.
FTAs are expected to become a central component of India’s strategy to counter the impact of Trump’s tariffs, particularly the 25% tariff on steel and aluminium imports that has disrupted global trade.
India, being the eighth-largest exporter of steel and aluminium to the U.S., faces significant challenges under Trump’s protectionist policies, which have targeted countries with high tariffs on U.S. goods.
FTAs in the Pipeline:
India is currently negotiating trade deals with several countries and economic blocs, including the United Kingdom, Oman, and the European Union. These agreements are designed to reduce trade barriers, such as customs duties, and provide greater market access for Indian goods.
India’s trade pact with the European Free Trade Association (EFTA), which includes Iceland, Liechtenstein, Norway, and Switzerland, is expected to be ratified by the end of the year.
Additionally, there is a possibility of restarting discussions on a mini-trade deal with the U.S., a proposal that faced limited progress during Trump’s first term.
Trump’s Tariff Policies and Their Impact:
Trump has accused India of being a “tariff abuser” and has warned of reciprocal levies on nations imposing high duties on American products. India is expected to be affected by these upcoming tariffs.
FTAs are seen as a way for India to maintain trade relations and reduce reliance on U.S. tariffs that could damage market access for Indian exporters.
Steps Already Taken by India:
The 2025 Union Budget addresses concerns over tariff protectionism, with a reduction in customs duties and efforts to rationalize trade taxes.
The Finance Ministry has factored in a revenue loss of Rs 2,600 crore due to tariff rationalization, signaling a willingness to make trade more competitive.
Central Board of Indirect Taxes & Customs Chairman, Sanjay Kumar Agarwal, mentioned that the Budget aimed to improve trade perception by reducing the average customs duty rate from 11.65% to 10.66%.
Impact of Tariff Cuts on U.S. Exports:
According to the Global Trade Research Initiative (GTRI), India has made significant tariff reductions in products such as fish hydrolysate, synthetic flavouring essences, and motorcycles based on engine capacity.
These changes are expected to benefit U.S. exports by lowering duties on products such as satellite spares and consumables.
Despite Trump’s criticism of India’s tariff structure, these tariff cuts could boost U.S. exports in several sectors.
Looking Ahead:
The ongoing negotiations and changes in India’s tariff policy indicate that India is taking proactive steps to navigate the challenges posed by global trade tensions and U.S. tariffs.
Whether these efforts will positively influence U.S.-India trade relations and reduce trade friction remains to be seen, especially in the context of the upcoming U.S. elections and the political climate surrounding international trade policies.