Even as deliberations are under way to calibrate a suitable policy response to the Trump Administration’s America First Trade Policy, India cannot bring down import duties to appease the US without applying the same yardstick to all its trade partners, sources have said.
“The Commerce Department is in discussions with all line Ministries, including agriculture and steel, to assess the situation and determine the room available for action on tariffs and other areas,” a source tracking the matter told businessline.
Trump’s America First Trade Policy, notified soon after he took over as the US President this week, warns of supplemental tariffs on trade partners to remedy its trade deficits.
Since the US has a persistent trade deficit with India, which was over $35 billion in FY24, it is expected that the Trump government would demand lowering of tariffs on items of interest to the US, especially agricultural products, the source said.
“Tariffs cannot be lowered exclusively for the US. If India has to lower tariffs on products of interest to the US, it will have to do it on an MFN basis for rest of the world,” explained Abhijit Das, trade economist and former head of Centre for WTO Studies.
Last year, India had done something similar.
Following a pact with the Biden government where it agreed to lower import duties on frozen turkey & duck, cranberries and blue berries, it did so for all countries on an MFN (Most Favoured Nation) basis. MFN means treating at par all trade partners that are signatories to the WTO.
Tariff cuts
“Tariff cuts for the US alone could be possible if it had a bilateral FTA with India but then the US, too, would have to lower tariffs and it is clearly reluctant to do so,” pointed out Ajay Srivastava, Founder, GTRI.
The US is India’s top trading partner, with exports to the US growing from $53.1 billion in FY20 to $77.5 billion in FY24, a 46 per cent increase.
