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As President Trump prepares to introduce what he calls ‘reciprocal tariffs’ on nations that he feels have imposed unjust taxes on the American economy, India is contemplating lowering import duties once more before the deadline of April 2. According to an Economic Times article, the US imports at hand are likely to suffer due to the tariffs.
The government is in the process of identifying certain US exports that stand to gain from the tariff reductions. Unlike the concessions granted in trade agreements, these cuts will be aforded on a Most Favored Nation (MFN) basis which means all MFN imports of the identified goods shall have such duties equally applied, as per Economic Times.
Those goods includes about four to five specialized electronics and chemicals along with the more exotic imports of aircraft, parachutes, and even cruise ships. India currently applies a tax between 10 to 7.5 percent on these goods.
In the past few months, New Delhi has already removed taxes on some US products including imported whiskeys, motorcycles, and scrap.
"Numerous approaches are being analyzed," the official said to Economic Timesunderlining that any policy decisions related to further cuts will only be decided at the uppermost echelons of the government, taking into account the possible scenarios and developments of the proposed India-US Bilateral Trade Agreement (BTA) and its outline. An official told Economic Times, “Further cut options are available, they are however subject to deeper cuts being taken at higher levels of government ranging from cabinet ministers all the way to the P.M.”Trumps expected tariffs, Warne suggested, Termed, “inside the beltway” thinking, Washington’s policy works 1-2 years, where people think in silos and react blindly to unfolds all over the world.Reactions across the world can sometimes backfire since a holistic worldview is absent. These actions can lead to situations where Governments decide impulsively and erratically without forethought, Politics and macroeconomics oppose each other leading to a chaos that results in uncertainty - domestically- imposed or externally- driven. Just from “inside the beltway” America operates where even domestic issues appear global, visa versa.
As noted by Economic Times, the changes to custom duties need to be done in tandem with changes in Foreign Trade Policy or are subject to World Trade organization of the MFN. Next, India’s simple average tariff in industry has changed in 2023 having gone down post 1st feb. It is at 10.66% while last year it stood at 13.5%.
The proposed BTA negotiations also include critical issues such as digital services and data localization aside from other discussions on tariffs. At the same time, India did not rule out lowering some tariffs that were politically sensitive relating to American farmers which has been the subject of formal trade negotiations since Wednesday, Henceforward.
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