US Tariffs Impact India-China Trade Negotiations
The US announcement of a 25 per cent tariff on Indian imports and penalties linked to Russian defence and energy purchases has intensified trade tensions. This move complicates India’s efforts to secure a favourable interim trade deal with the US. Meanwhile, China is ahead in negotiations, potentially gaining tariff advantages. The evolving scenario affects India’s export competitiveness and economic growth prospects.
US Tariff
The US imposed a 25 per cent tariff on Indian imports just before a key negotiation deadline. This tariff level nearly matches the earlier 26 per cent reciprocal tariff India faced. The US also threatened penalties on countries buying Russian oil and military equipment, potentially doubling tariffs to 100 per cent. This pressure pushes India to accelerate trade talks with the US.
India’s Negotiation Challenges
India aims to avoid a one-sided deal by maintaining red lines, especially on agriculture. Its tariffs comply with WTO rules, and it resists US demands for zero duty market access. India is willing to consider concessions on defence equipment, natural gas, and nuclear reactors. However, additional tariffs on steel, aluminium, and a proposed BRICS levy complicate the talks.
China’s Position and Advantage
China is negotiating a US trade deal faster and may secure lower tariffs and waivers on secondary tariffs related to Russian imports. Though no final agreement exists, China’s early progress gives it a competitive edge. China’s large Russian oil purchases and sovereign stance on energy imports contrast with US pressure tactics.
Impact on Indian Exporters and Economy
Uncertainty over final US tariffs causes hesitation among American buyers, affecting Indian exports. Higher US tariffs on China have redirected Chinese exports to Europe at low prices, squeezing India’s market share there. Economists warn that increased tariffs and penalties may slow India’s GDP growth, with the extent depending on penalty severity.
Future Outlook and Strategic Moves
India seeks an interim deal by October, possibly earlier due to US pressure. A final deal might offer tariffs between 10 and 15 per cent, similar to those given to the UK and Japan. India may adopt quota systems for sensitive sectors to gradually open markets. The ultimate resolution may depend on direct talks between the Prime Minister of India and US President.
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