India seeks easier export rules as US pushes for lower tariffs

Discussions focused on bringing Indian duties on US products in line with the tariff levels imposed by the US on Indian goods. In return, India sought relief from US compliance burden on shrimp, processed food items, pharmaceuticals, and chemicals, among others, the people cited above said on the condition of anonymity. A US delegation led by Assistant US Trade Representative for South and Central Asia Brendan Lynch will hold meetings with Indian officials over three days till 28 March.

One of the key points under negotiation is India’s 30% duty on US shrimp, which could be lowered to match the 5.77% duty imposed on Indian shrimp in the US. Alongside, discussions are underway to adjust tariff disparities in other sectors. Currently, Indian exports of plastics and related articles face 4.38% duty in the US, while US products face 9.95% duty in India.

Machinery and computers are taxed at 1.3% in the US compared to 6.6% in India. Chemicals and pharmaceuticals face a 1.06% duty in the US, while India imposes a 9.68% duty on similar imports. The duty on diamonds, gold, and related products stands at 2.12% in the US but is 15.45% in India. In textiles and clothing, tariffs are 8.99% in the US for Indian goods and 10.37% in India for US merchandise, commerce ministry data showed.

“This tariff restructuring will help India avoid being included in the US President’s upcoming announcement on non-reciprocal tariffs, expected on 2 April,” said the first person.

On Tuesday, Trump told reporters that he may give a lot of countries “breaks” from his reciprocal tariff move, without giving details.

India’s recent trade policy decisions—including changes to safe harbour rules, extending these provisions to EV batteries, and scrapping the ‘Google tax’—were also discussed to press for greater market access for Indian textiles, engineering goods, gems and jewellery, electronics goods and drugs and pharmaceuticals in the US, by revising the list of goods facing non-tariff barriers imposed by the US, the second person added.

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New Delhi is trying to avoid reciprocal US levies on its key exports such as garments, engineering, electronics, pharmaceuticals, and gems and jewellery, which accounted for around 72.7% of the total goods trade between India and the US in FY24, contributing $56.34 billion out of the overall trade of $77.52 billion.

As per the second person, discussions hovered around India’s average weighted tariff, which stood at 17% in 2023 and was reduced to 10.66% after duty changes in the Union Budget for FY26. As per the commerce ministry, the weighted average agricultural tariff, including textiles, was 39%, while industrial goods faced a tariff of 13.5% in 2023.

The average weighted tariff is the actual tax percentage that imported goods face on average, but it gives more importance to products that are imported in large quantities.

To be sure, India has revised tariffs on several US products to address trade concerns. The import duty on bourbon whiskey has been reduced from 150% to 100%. Tariffs on Harley-Davidson motorcycles have been lowered from 50% to 30%, and the duty on ethernet switches has been cut from 20% to 10%.

On Monday, India decided to drop the so-called Google tax, a levy on multinational companies providing services in India, in an apparent move to placate the US. A day later, India’s tax regulator revised income tax rules to offer more benefits to electric vehicle (EV) and EV battery makers. A circular from the Central Board of Direct Taxes (CBDT) expanded safe harbour rules by raising the eligibility threshold from ₹200 crore to ₹300 crore. Additionally, lithium-ion batteries for electric and hybrid vehicles are now classified as core auto components, making them eligible for tax benefits. These changes are seen as part of India’s strategy in ongoing trade talks with the US, where it is seeking better market access for its exports.

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At the same time, commerce ministry data shows that import duties on several high-value American products into India are negligible. For instance, in FY24, petroleum crude—the US’s top export to India valued at $5.03 billion—was taxed at ₹1 per tonne, making it one of the lowest-taxed imports despite its high trade value. Other key exports from the US, including coal (valued at $4.2 billion in FY24), large aircraft ($1.94 billion), and liquefied natural gas ($1.41 billion), face 2.5% tariff.

A working paper by the Economic Advisory Council to the Prime Minister notes that US authorization requirements are complex and time-consuming, leading to higher costs and delays for Indian exporters. Food exports face additional challenges due to strict pesticide rules and labelling requirements. The paper suggests that the US streamline approvals and provide clear reasons for any delays or rejections.

It also points out that India’s gemstone cutting & polishing industry has been on the US TVPRA list since the 1990s over child labour concerns. TVPRA stands for Trafficking Victims Protection Reauthorization Act. However, the industry has changed, with no child labour cases now reported. Many craftsmen have become exporters and follow compliance norms. India can request the US to remove the industry from the list.

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Queries emailed to the spokespersons of the ministries of commerce and external affairs remained unanswered till press time, while US Embassy spokesperson Christopher Elms, who also responded on behalf of the USTR, said, “We can’t share details on any private diplomatic conversations.”

Trade experts believe that India should not push for an exemption from the proposed reciprocal tariff plan. Instead, they suggest that India should advocate for a zero-for-zero tariff structure, which would be more beneficial for Indian traders.

“The zero-for-zero tariff is the best option that India should pursue. If India argues for an exemption from the reciprocal tariff plan, it may end up conceding greater market access to US products without securing equivalent benefits,” said Ajay Srivastava, founder, Global Trade Research Initiative (GTRI).

According to the commerce ministry, India’s top 10 exports to the US in 2023-24 included drug formulations and biologicals ($8 billion), precious and semi-precious stones ($6.57 billion), petroleum products ($5.83 billion), telecom instruments ($5.82 billion), gold and other jewellery ($3.3 billion), iron and steel products ($2.78 billion), cotton garments and accessories ($2.74 billion), electronic components ($2.69 billion), cotton fabrics and made-ups ($2.61 billion), and marine products ($2.5 billion).

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