India is mulling extensive duty cuts for various items amid the looming threat of ‘reciprocal tariffs’ from the US. The update came even as President Donald Trump intensified his tariff offensive on Thursday with a 25% tariff on imported cars and car parts. He had also announced announced a 25% tariff on goods exported into the US by countries that buy Venezuelan oil and gas earlier this week.

According to a CNBC-TV18 update, top Indian officials remain in active discussions to review the current import categories and duties as well as consider tariff cuts. The publication reported that several items including medical and scientific instruments, cruise ships and aircrafts could see a reduction in duties. space crafts, cars, turbo jets or propellers could also see a change. According to the report, high end jewellery, footwear and plastic polymers, as well as organic chemicals are also under consideration for a duty cut.

“Both countries plan to negotiate a mutually beneficial, multi-sector bilateral trade agreement. Both countries would focus on increasing market access, reducing tariff and non-tariff barriers, enhancing supply chain integration and resolving bilateral trade issues,” Union minister Jitin Prasada told the Lok Sabha earlier this week. 

The Donald Trump administration has repeatedly heralded April 2 as ‘Liberation Day in America’ — with several countries including India likely to be impacted by sweeping ‘reciprocal’ tariffs. The ongoing talks however offer a glimmer of hope for the country with one of the highest protectionist taxes. The POTUS has also indicated a softening of stance over the past few days and suggested there will be ‘flexibility’ in the tariffs.

‘More lenient than reciprocal’

According to a Wall Street Journal report from Monday, the White House may be narrowing its approach to the upcoming tariffs. It is now likely to omit a set of industry-specific curbs on crucial sectors such as automobiles, pharmaceuticals and semiconductors. 

“I’ll probably be more lenient than reciprocal, because if I was reciprocal, that would be very tough for people. I know there are some exceptions, and it’s an ongoing discussion, but not too many, not too many exceptions,” the President told Newsmax during a Tuesday interview. 

Trump had heavily teased tariffs throughout February and also signed a memorandum ordering the creation of a ‘fair and reciprocal plan’ for US trade relationships. Trump later insisted that value added taxes (or VAT) levied on goods during each stage of production would also be considered tariffs under the plan. The date of the announcement was later pushed back by a day to April 2 as the President “didn’t want [it] to be April Fool’s Day because then nobody would believe what I said”. 

Modi-Trump meet

Trump appeared for a joint conference with Prime Minister Narendra Modi on February 13 — hours after his announcement heralding tariffs. The POTUS had insisted that it was “finally time” to address ‘long-running disparities’ in the trading relationship between India and the United States. 

“We are being reciprocal with India.  Whatever India charges, we charge them.  So, frankly, it no longer matters to us that much what they charge, because whatever they charge — I had discussions with India in the first term about the fact that their tariffs were very high, and I was unable to get a concession.  So, we’re just going to do it the easy way, and we’re just going to say: Whatever you charge, we charge” the White House quoted him as saying.

What will reciprocal tariffs do?

Reciprocal tariffs imposed on India will make Indian exports more expensive for American consumers — consequently leading to a decline in demand. It will also raise costs for American industries that depend on Indian products. The imposition of higher tariffs on so many countries could also lead to an overall slowdown and put the US at risk of inflation. The new tariffs could also make India lose ground as America turns towards alternative suppliers like Indonesia, Israel and Vietnam. Meanwhile tariffs against other countries such as China could also have also sparked concerns that cheaper Chinese steel and aluminium could find its way into India — threatening the business of domestic manufacturers. 

Which countries will be impacted?

US Treasury Secretary Scott Bessent told Fox News during a recent interview that 15% of the country’s trading partners impose high tariffs on foreign goods and erect major hurdles for trade. These countries — which he tagged as the ‘Dirty 15’ will reportedly be the focus of the reciprocal tariffs scheduled for April 2. According to a Washington Post report, India is one of the countries under evaluation for having the most imbalanced trade ties with the US. The full list — which also includes the European Union, China, Brazil and Canada — was reportedly outlined in a Federal Register notice from the Office of the US Trade Representative. The details however remain fluid with Trump likely to decide the details of his April 2 announcement closer to the date.

What is India doing to offset the reciprocal tariff threat?

India is bound by its commitments to the World Trade Organization and therefore faces difficulties in lowering tariffs to the US as sought by Trump. A Free Trade Agreement between the two countries must be reached in order for India to offer preferential access (under specific conditions). An US delegation led by assistant trade representative Brendan Lynch is currently in New Delhi for bilateral trade agreement negotiations. An agreement — reached before April 2 — could serve to protect the country from potentially debilitating tariffs.

India also appears to have struck a conciliatory note during recent interactions — with Trump claiming earlier this month that New Delhi had agreed to “cut their tariffs way down”. The remarks came soon after Commerce Minister Piyush Goyal visited the US for trade talks with his counterpart Howard Lutnick. 

The Modi government had also announced a reduction in duties for Harley Davidson motorcycles and bourbon whiskey imported into India. New Delhi has also scrapped the Google tax from April 1 — removing a 6% equalisation levy on digital advertising services provided by foreign technology firms.

Bilateral trade between India and the US stood at $ 118.28 billion in 2023-24 — with a trade surplus of $ 36.74 billion. Washington was the top trading partner of New Delhi during 2021-22 and 2022-23. Meanwhile India is a relatively less important source of imports, ranking behind countries such as Canada, Mexico, China, Japan and the UK.

According to a recent Reuters report citing government sources, New Delhi is now open to cutting tariffs on more than half of US imports (worth $23 billion) as part of a trade deal between the two nations. Sources told the publication that the country was open to reducing tariffs on 55% of US goods it imports that are now subject to tariffs ranging from 5% to 30%. A bilateral trade agreement could also help lower non-tariff barriers such as sanitary and phytosanitary measures as well as regulatory restrictions. An internal analysis by the Indian government suggests that such reciprocal tariffs would hit 87% of its total exports to the United States worth $66 billion.