US and India Near Deal to Slash Punitive Tariffs

The Government of India and the United States are finalizing the first tranche of a bilateral trade agreement (BTA) aimed at resolving trade tensions and increasing bilateral trade from $191 billion to $500 billion by 2030. The deal specifically targets the removal of 50 percent punitive tariffs imposed by the Donald Trump administration, which included a 25 percent reciprocal tariff and a 25 percent penalty tied to India's purchase of Russian crude oil.

Negotiations in Washington and New Delhi have focused on restoring predictability to sectors such as textiles, pharmaceuticals, and gems. The US has indicated a 0 percent tariff on natural diamonds once the deal is reached. To narrow India's trade surplus, Indian state-run oil companies have arranged to import liquefied petroleum gas (LPG) and increased imports of US oil. However, friction remains over US demands for market access regarding dairy, automobiles, and agricultural products like apples and almonds, which India resists due to political sensitivity.

While the substance of the deal is largely agreed upon, officials are still resolving the sequencing of implementation. The agreement must receive final clearance from the United States Trade Representative and India's Ministry of Commerce and Industry before moving to President Donald Trump and Prime Minister Narendra Modi for final approval. Additionally, US Ambassador Sergio Gor announced that India will be invited to join PaxSilica, a US-led secure silicon supply chain initiative.