Indo-US Trade Deal: India Inc Makes Tariff Wishlist

Earlier, President Trump announced reciprocal tariffs on most major economies, ostensibly to balance the US's trade in goods. During the ongoing internal brainstorming sessions that followed, Indian industry captains made the first cut of their priorities clear to the Indian government.

Industry agrees that India should not get a label similar to Mexico or Vietnam, and has made it clear in discussions with the government that it should be ensured that goods coming to India from the ASEAN countries, Bangladesh or elsewhere, also adhere to these rules, as "there is a distinct fear that China may dump its excess production here".

If India manages to strike a bilateral trade agreement (BTA) with the US, it will have to ensure that Chinese producers can't take advantage of lower tariffs for Indian exports to the US by channeling Chinese products via Indian soil. Hence, according to the industry, a base criterion of 40 per cent domestic value addition is a must.

Industry representatives have also sought changes to product descriptions, especially within the Harmonised System (HS) code. This will provide a clear and more precise definition of what constitutes an originating product.

Such changes can lead to more accurate and efficient determination of whether goods qualify for preferential trade benefits like lower tariffs under the BTA. Ultimately, it will strengthen the BTA's rules of origin clause. 

The 90-day breather from Trump's tariffs has accelerated the negotiation process to arrive at an Indo-US BTA as soon as possible. Starting April 23, Indian officials are gearing up for talks with their American counterparts in Washington, on an “early tranche” of the BTA.

Products Where India Has An Advantage

India Inc. and Commerce Ministry officials have both agreed that top priority should be given to product lines where both sides are willing to offer zero tariffs (called zero-for-zero tariffs), as India holds a distinct advantage in these areas. The idea is to ask for Indian exports at zero tariffs in these sectors, in exchange for American exports at zero tariffs in the same product categories.

In this first category (which can be called “Advantage India”), the list of products includes auto components, footwear, certain chemicals, readymade garments, and electronic goods.

In 2024-25, India’s auto component exports to the rest of the world amounted to US$ 21.2 billion, showing a 5.5 per cent year-on-year growth. India’s auto component sector contributes 2.3 per cent to India’s GDP and directly employs over 1.5 million people.

So, achieving a zero-for-zero tariff in the BTA can ensure continuity, progress and employment generation in this sector.

Indian negotiators may strive for similar tariffs in electronic goods and pharma as well. Global exports of India in electronic goods and pharma products stood at US$ 38.6 billion and US$ 30.5 billion, respectively, in 2024-25. The growth rate of exports of electronic goods has been at a whopping 32.5 per cent, and that of pharma has been at 9.4 per cent.

The Indian contingent will likely push for a zero-for-zero tariff also in footwear and some chemicals, where Indian manufacturers have advantages.

Products With Mixed Advantage

The industry representatives have identified a second category (which can be called “Mixed Advantage”), where Indian manufacturers hold a certain amount of advantage but have not performed well in recent times due to various reasons.

Gems and jewellery are the prime example of this category. Historically, India holds an advantage in this sector in terms of cost and distinct labour skills. Total exports to the rest of the world have been US$ 29.8 billion in 2024-25.

However, the sector has undergone a negative export growth of 8.8 per cent, compared to the previous year. The dwindling demand in most of the export destinations, including the USA, is the primary reason.

Similarly, chemical exports, though substantial at US$ 28.7 billion in 2024-25, have also undergone a negative growth of 2.3 per cent.

It is not practical to ask for zero tariffs in all sectors under the negotiation. These are the sectors where the industry representatives wish for lower tariffs from the US side, as much as possible.

Toys, petrochemicals, some categories of engineering goods, and a few agricultural products also fall under this “Mixed Advantage” category.

Products Where USA Has An Advantage

Officials said that the US contingent is likely to push for lower Indian tariffs for products in which American manufacturers hold an advantage. That is the core principle of any trade negotiation.

The list of American priority items includes products like high-end automobiles, motorcycles, alcohol, and agricultural products like almonds and pistachios.

The US producers have been vehement in their demand to open up Indian agricultural and dairy markets. They are actively seeking greater market access for agricultural products in India, with almonds, pistachios, and ethanol being at the top of their immediate wishlist. 

The USA has also been pressuring India to stop importing crude oil from Russia for quite some time. Going by the latest data, it seems that the American push is working. In February 2025, Indian crude imports from Russia hit a two-year low, at around 1.4 million barrels a day.

Crude oil, refined petroleum products, and liquefied natural gas (LNG) are major exports from the USA to India. And these will be top priorities for the US trade negotiators when their Indian counterparts reach Washington this week. 

Industrial inputs are necessary to draw a clear trade negotiation strategy. The direction of negotiation, spaces of flexibility, and most importantly, the red lines not to be crossed are always determined by those inputs.

Industry captains have spoken, but only time can tell whether their wishlist will hold water when the final BTA is inked.