For the short-term benefit of sealing a trade deal with an unreliable Trump, is New Delhi harming its own long-term security interests?
India and the United States have moved closer to a bilateral trade agreement. In a joint statement issued on February 7 (February 6 in the U.S.), the two governments announced that they had reached “an interim trade deal framework.”
This will lower tariffs, and strengthen energy and economic cooperation between India and the U.S.
In what will come as a relief to Indian traders, the U.S. will reduce the current 50 percent tariff rate on imports from India – this includes a 25 percent tariff imposed on India for purchasing Russian oil that was piled on to the 25 percent reciprocal tariff rate announced earlier – to 18 percent.
According to the joint statement, while “India will eliminate or reduce tariffs on all U.S. industrial goods and a wide range of U.S. food and agricultural products,” the U.S. “will apply a reciprocal tariff rate of 18 percent” on many products imported from India, including textile and apparel, leather and footwear, plastic and rubber, organic chemicals, home décor, artisanal products, and certain machinery.
The joint statement is silent on the 25 percent punitive tariff on India. However, in an executive order signed on Saturday, Trump rescinded the 25 percent penalty tariff, albeit conditionally.
In the joint statement, the two governments also committed “to provide each other preferential market access in sectors of respective interest on a sustained basis,” and to “address non-tariff barriers that affect bilateral trade.”
“Recognizing the importance of working together to resolve long-standing concerns, India also agrees to address long-standing non-tariff barriers to the trade in U.S. food and agricultural products,” it said.
Importantly, it commits India to purchasing “$500 billion of U.S. energy products, aircraft and aircraft parts, precious metals, technology products, and coking coal over the next 5 years.”
The agreement on an interim trade deal framework has come after many rounds of negotiations.
It was on February 13 last year that India and the U.S. agreed to begin talks aimed at reaching a Bilateral Trade Agreement (BTA). Talks commenced, but a deal proved elusive. In July, a 25 percent tariff on Indian goods came into effect. Even as a stunned India was grappling with the implications of this tariff rate, Trump struck India with another blow. In August, he slapped India with an additional 25 percent tariff as penalty for purchasing oil from Russia. This took total tariffs on Indian exports to a whopping 50 percent—among the highest in the world.
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