BIG News For India! Trump Tariffs May Drop To 15-16% With Trade Deal, Says Report

India and the United States are engaged in advanced discussions regarding a trade agreement that could significantly lower tariffs on Indian exports, reported Mint citing sources. Currently, these tariffs stand at 50%, but they might be reduced to between 15% and 16%, according to the report. This development follows Chief Economic Advisor V Anantha Nageswaran's optimistic outlook on resolving the tariff dispute within two months.

Nageswaran expressed confidence that the extra penal tariff of 25% imposed by the White House would soon be resolved. Speaking at an event organised by the Bharat Chamber of Commerce in Kolkata, he mentioned, "Although I don't have a crystal ball or any inside information, my personal confidence is that, in the next couple of months, if not earlier, we will see a resolution at least to the extra penal tariff of 25%."

Potential Changes in Tariffs

The reciprocal tariff of 25% might also decrease to levels previously anticipated, ranging from 10% to 15%. Nageswaran noted that if this reduction occurs, it would be a significant reason for celebration. The ongoing negotiations aim to address key issues such as energy and agriculture, with India considering a gradual reduction in Russian oil imports.

India currently imports about 34% of its crude oil from Russia and approximately 10% from the US. The purchase of Russian oil had led to an additional 25% tariff on Indian exports. In response, India may allow more non-genetically modified (GM) American corn and soymeal into its markets as part of the trade deal.

US Corn Imports

The US is seeking new buyers for its corn after China reduced its imports significantly. India's import duty on non-GM maize from the US will remain unchanged at 15%, with an annual quota of 0.5 million tonnes. Despite this duty, India could increase its imports as overall US corn exports have declined from $18.57 billion in 2022 to $13.7 billion in 2024.

The trade deal might be announced during the ASEAN Summit later this month, where US President Donald Trump and Prime Minister Narendra Modi are expected to meet. However, their participation in the summit has not been confirmed yet.

Negotiations and Energy Trade

The commerce ministry, along with the external affairs ministry and national security adviser's office, is negotiating on behalf of India. The country is contemplating allowing ethanol imports while reducing Russian oil purchases. In return, the US may offer concessions on energy trade.

Indian state-run oil companies are likely to be advised to diversify their crude sourcing towards the US. Although Indian officials have communicated plans to reduce crude imports from Russia during a visit to Moscow, the US has not agreed to match Russia's discounted prices.

Impact on Oil Prices

Bloomberg reported that the price gap between Russian discounts and benchmark crude has narrowed significantly-from over $23 per barrel in 2023 to just $2-$2.50 per barrel by mid-October-making Middle Eastern and US crude more competitive. As a result, India saved $3.8 billion in FY25 on oil purchases due to shrinking discounts on Russian crude.

The United States remains India's largest merchandise importer and one of few major economies where New Delhi runs a trade surplus. India's exports to the US reached $86.51 billion in FY25, making it New Delhi's largest market for merchandise shipments.

Future Prospects

Nageswaran stated at an event organised by the Merchant Chamber of Commerce & Industry last week that he believes "the penal tariff will not be there after November 30." Despite achieving half of this year's export volume already, India could face a 30% reduction next year if tariffs persist.

Overall exports contribute one-fourth of India's GDP, highlighting their significance for economic growth. The potential trade agreement with the US could provide substantial relief for Indian exporters by reducing tariffs and fostering better trade relations between both nations.