U.S. Demands Near-Zero Tariffs on Indian Goods, No Relief Expected for India

Trade Tensions Rise as U.S. Pushes for Greater Market Access

In a move that could further strain India-U.S. trade relations, the United States has reportedly demanded zero tariffs on almost all goods, except for agricultural products, in its ongoing trade discussions with India. The report, published by CNBC-TV18, suggests that the Biden administration is unlikely to grant India any special exemptions from the reciprocal tariffs set to take effect on April 2.

This development follows multiple instances where former U.S. President Donald Trump publicly criticized India for imposing high tariffs on American goods, labeling the trade policies as “unfair.”

India Faces Pressure to Cut Tariffs Amid Trade Talks

According to sources cited by RedboxGlobal India, India is resisting immediate tariff cuts on automobile imports but is open to negotiating incremental reductions. The Indian government is reported to have held talks with domestic automakers to discuss the feasibility of reducing tariffs, but a complete elimination of import duties remains unlikely.

The Indian Commerce Minister, Piyush Goyal, recently met with the U.S. Trade Representative (USTR) and the U.S. Commerce Secretary to discuss trade relations. While further negotiations between both nations’ officials are expected, reports suggest that Washington is unwilling to make an exception for India on tariff relaxations.

U.S. Market Access Demands and India’s Stance

• The United States has been pushing India for greater market access across various sectors, particularly in manufacturing, automobiles, and medical devices.
• Indian officials have indicated that while they acknowledge Washington’s concerns, they cannot immediately lower tariffs on critical domestic industries, including automobiles.
• India has been advocating for a more phased approach to tariff reductions, citing the need to protect domestic industries from an influx of foreign products.

Tariff War Intensifies: No Relief for India

The escalating trade tensions come at a time when India is seeking greater flexibility in trade agreements with major economies, including the European Union, the United Kingdom, and the United States. However, Washington’s rigid stance on near-zero tariffs could make negotiations challenging.

According to trade analysts, India’s reluctance to eliminate tariffs outright stems from several factors:

1. Protecting Domestic Manufacturing: The Make in India initiative aims to strengthen the local manufacturing sector by reducing dependence on imports.
2. Employment Concerns: The Indian government fears that lowering import duties drastically could impact local employment, particularly in sectors like automobile manufacturing and electronics.
3. Strategic Trade Interests: India has been negotiating free trade agreements (FTAs) with multiple countries, and any abrupt policy change could affect these ongoing discussions.

Past Disputes in India-U.S. Trade Relations

India and the U.S. have a history of trade disputes, particularly in areas like:

• Medical Devices: The U.S. has been urging India to lift price caps on cardiac stents and knee implants, arguing that such regulations discourage American exports.
• Dairy and Agriculture: India’s strict certification requirements for dairy imports have been a major point of contention.
• Digital Trade and Data Localization: The U.S. has opposed India’s data localization rules, which require foreign companies to store Indian user data within the country.

What’s Next for India-U.S. Trade Relations?

Despite the ongoing challenges, both nations continue to explore opportunities for bilateral trade growth. However, India’s refusal to eliminate tariffs and the U.S. push for near-total tariff removal could prolong trade tensions.

Trade experts suggest that India is likely to:

• Offer gradual tariff reductions instead of an immediate cut
• Seek concessions in other areas, such as services and technology trade
• Use upcoming trade meetings to negotiate a balanced approach that supports domestic industries while meeting U.S. demands halfway

With April 2 fast approaching, all eyes will be on whether India and the U.S. can reach a compromise or if the dispute will lead to new trade barriers that could impact economic growth for both nations.