India is open to reducing tariffs on over half of U.S. imports worth $23 billion as part of the first phase of an ongoing trade deal with Washington, according to two government sources. This move would mark India’s most significant tariff reduction in years, aimed at avoiding U.S. retaliatory tariffs set to take effect on April 2 under President Donald Trump’s trade policy.
The reciprocal tariffs have disrupted global markets and forced policymakers, including key U.S. allies, to react swiftly. In an internal review, Indian officials estimated that 87% of its exports to the U.S., valued at $66 billion, could be affected by these tariffs, according to two sources who spoke on condition of anonymity.
India has signaled its willingness to cut or entirely remove tariffs on 55% of U.S. imports currently taxed between 5% and 30%, one source revealed. The goods in question account for over $23 billion in imports from the U.S. However, the Indian government has not yet finalized its decision and is exploring alternative approaches, including sector-specific adjustments or product-by-product negotiations instead of a broad tariff cut.
The Indian trade ministry, Prime Minister’s Office, and government spokespersons did not respond to requests for comment.
According to World Trade Organization (WTO) data, the U.S. trade-weighted average tariff is about 2.2%, whereas India’s stands at 12%. The U.S. runs a $45.6 billion trade deficit with India.
During Prime Minister Narendra Modi’s U.S. visit in February, both nations agreed to kickstart trade negotiations to break the impasse over tariffs. New Delhi wants an agreement before the U.S. formally enacts its reciprocal tariffs and will host Assistant U.S. Trade Representative Brendan Lynch and a U.S. delegation for discussions starting Tuesday.
India’s tariff-cut proposal depends on securing relief from U.S. retaliatory measures, officials warned. Additionally, India is considering a broader tariff reform to uniformly lower trade barriers, but discussions remain in early stages and may not be immediately included in the U.S. negotiations.
Despite Modi’s swift congratulations following Trump’s election win, the U.S. president has repeatedly criticized India as a "tariff abuser" and "tariff king", vowing no nation would be spared from U.S. tariffs.
New Delhi estimates U.S. tariffs could rise by 6% to 10% on key Indian exports such as pearls, mineral fuels, machinery, boilers, and electrical equipment, which account for half of India’s shipments to the U.S.. The pharmaceutical and automotive sectors, worth $11 billion in exports, face the greatest risk, given their heavy reliance on the U.S. market.
If India’s exports take a hit, alternative suppliers like Indonesia, Israel, and Vietnam may benefit, a government official noted.
To gain political support from both Modi’s allies and opposition parties, India has set firm boundaries in the negotiations:
India’s balancing act was reflected in comments made by Trade Secretary Sunil Barthwal to a parliamentary committee on March 10, where he emphasized, “We will not compromise on our national interest.”
Meanwhile, U.S. Commerce Secretary Howard Lutnick has also weighed in, underscoring the tough road ahead for both sides as they attempt to finalize a deal before the April 2 tariff deadline.
Subscribe to our newsletter for the latest financial insights and news.
+
