ET Explainer: Why India-US trade talks hit a rocky road amid new US tariffs and penalties
25% tariff on Indian goods
from August 1, besides a penalty in lieu of the former's purchases from Russia. These steep tariffs roll out notwithstanding the earlier decision by the two countries that the first phase of the trade deal will be finalised by September 2025, targeting bilateral trade of $500 billion by 2030. A look at the contentious issues that have held up progress:
Absence of assurance
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India wants the US to provide a water-tight deal with assurance that no additional tariff would be levied on its exports post the trade deal, which the US is not agreeable to. New Delhi wants clear proposals from the US in view of the current administration's unpredictable trade moves. Indian exports already face a baseline tariff of 10%, 50% on steel & aluminium, 25% on auto and auto components.
Access in farm sector
India has reservations about completely opening up its farm sector, which is largely subsistence, unlike America's, which receives large government subsidies. New Delhi's pacts with other countries have so far kept the dairy and farm sectors out. New Delhi also has strong reservations on allowing any market access to GM foods or even GM cattle feed.
High tariffs
Prez Trump has repeatedly flagged India's high tariffs, but New Delhi maintains that its average tariff on US goods is much lower than the bound rate at the World Trade Organisation (WTO), barring a select sensitive goods. India had, in its last budget, slashed the duties on a number of products, including motorcycles for the US.
The Pakistan Factor
Repeated statements by Trump that he brokered the Pakistan-India ceasefire have not helped the bilateral relationship, with New Delhi viewing it as a tilt towards Pakistan.
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