President Donald Trump said Thursday that India has offered a trade contract offering nearly “no tariffs” on US goods as South Asian countries try to avoid higher imports and export costs.
India challenged Trump’s claim. However, New Delhi aims to win a trade contract with the US on so-called mutual tariffs of its major trading partners within the 90-day suspension announced by Trump on April 9th. On May 8, the White House secured a trade agreement with the UK two days after India signed a similar agreement.
India’s equity benchmark rose by around 1.5%, following Trump’s comments. The Nifty 50 rose 1.6%, while BSE Sensex scored 1.48%, reaching its highest level in seven months.
India was one of the first countries to begin trade negotiations with the US after Prime Minister Narendra Modi visited the White House in February, and both sides agreed to close bilateral deals this year.
Meanwhile, Vice President JD Vance visited India last month to meet with Prime Minister Narendra Modi, celebrating what was called “very good progress” in the trade agreement between Washington and New Delhi.
What were you actually told?
“It’s very difficult to sell in India. They basically offer a transaction where they are willing to literally not charge us tariffs,” Trump said in a meeting with executives in Qatar’s capital Doha. “They are the best and now they say there are no customs duties.”
In a quick statement to the local press, Indian Foreign Minister Subramanyam Jaishankar opposed Trump’s claims, saying, “Nothing will be decided until everything is like that.” He added that “judging about it is too early” until a “mutually beneficial” agreement is reached.
Trump has not provided details of New Delhi’s obvious offer and the Indian Ministry of Commerce did not immediately respond to a media request for comments.
What is the status of US-India trade relations?
The United States is India’s largest trading partner, with bilateral trade totaling around $129 billion in 2024. Last year, India operated a $45.7 billion surplus in the US, mainly in the form of pharmaceuticals, electromechanicals and gemstones.
Trump has long complained that India’s tariffs are so high that it hurts US businesses, so Trump has pledged to impose a 27% “mutual” tariff on India. These duties are currently pending until early July.
During the suspension, 10% base tariffs continue to be applied to India and many other countries.
The average tariff rate in India is 17% compared to 3.3% by the US, according to a report by the Council of India for a survey on international economic relations.
In recent weeks, India has overtured to sort out Trump’s public disapproval, including reducing import duties on US goods such as bourbon whiskey to 150-100% and reducing import duties on US goods such as Harley-Davidson motorcycles to 50-40%.
As part of ongoing trade negotiations, New Delhi is also proposing zero tariffs on auto parts at a fixed amount to each other, Bloomberg reported earlier this month.
A delegation of Indian officials is set to visit the US later this month to try to advance consultations. Reuters news agency reported that India’s trade minister Piyush Goyal might also visit.
Trump’s recent comments come days after India threatened to impose retaliatory tariffs related to US higher obligations on steel and aluminum.
But for now, trade talks are believed to be going well.
What are the estimated conditions for the transaction?
Reuters reported that New Delhi offered to cut its obligation to zero in 60% of US imports in its first phase deal, while also reporting that it has priority access to almost 90% of imports from India.
In theory, this would lower the average tariff difference between India and the US (the fluctuations in tariff charges that countries levie on each other) by 9 percentage points, significantly lowering the trade barriers for the world’s fifth largest economy.
Compared to other countries in which India trades, the preferred market access – or lower import requirements into the US, is looking at key products such as jewelry, textiles, and agricultural products such as bananas and grapes.
“India’s preferred market access means improving the terms of trade for these goods compared to other US trading partners,” an Indian government official who prefers not to name it, told Reuters.
To make the deal more attractive to Washington, India has also offered to facilitate export restrictions on some of the more valuable US imports, the first official said. These include aircraft, electric vehicles, medical devices and hydrocarbons.
Beyond tariffs, India has asked the US to treat it on par with other US allies such as the UK and Japan in terms of access to key technology sectors such as artificial intelligence, biotechnology and semiconductors.
What are the obstacles to the “zero riff” regime?
India’s expectations of being exempt from tariffs are at odds with deals struck between the US and the UK. Under this agreement, only certain products based on mutual interest removed the duties.
Elsewhere, U.S. Treasury Secretary Scott Bescent suggested last week that Washington may be trying to secure a “purchase agreement” for certain products with China as part of its ongoing trade negotiations with Beijing.
Therefore, recent trade contracts suggest that Trump’s tariff strategy corresponds to the engraving of certain commodities, in contrast to broad free trade agreements. Comments from Indian and US officials in the future suggest a similar arrangement.
Domestic issues also hinder free trade contracts. India has long used tariffs to protect the agricultural market from cheap imports. Farmers have expressed fear that Modi will undermine these protections as part of his deal with Trump.
After that, India is in a difficult position, even at the geopolitical level. While Washington views New Delhi as a offset to the influence of Beijing’s growing influence, India imported $113.45 billion from China last year. In contrast, it imported just $400 billion from the US.
Furthermore, China recently warned the UK about a trade deal with the US. It accused the UK of working with the US in a move that could force the UK to exclude Chinese products from its supply chain.
China warns that it is ready to hurt countries along the US to put pressure on Beijing.
India has recently shown an eagerness to engage in trade transactions after years of skepticism. Last week it signed an agreement with the UK that significantly reduces the duties of many products.