As the reciprocal tariff plan of the US is expected to get greater clarity within a month and a bilateral trade deal between the two countries is expected only by last quarter of 2025, one of the options for India to avoid the new taxes by the world’s largest economy is to propose zero duties on some industrial products, according to a report.
“A more proactive approach would be for India to propose eliminating tariffs on most industrial products, provided the US does the same. India should identify tariff lines where duty cuts won’t harm domestic industries, referencing its past FTA offers to Japan, Korea, and ASEAN. Agriculture may be excluded from the offer,” the report by Global Trade Research Initiative said.
“India should present this proposal before April, ahead of the US tariff decision. If accepted, India could significantly reduce or avoid reciprocal tariffs,” founder of GTRI Ajay Srivastava said.
Under the Asean-India Trade in Goods Agreement (AITIGA) agreement was reached in 2010 to progressively reduce and eliminate tariffs on 76.4% of goods traded between two sides. Tariff reduction was on 90% of the products. India’s FTA with Japan covers more than 90% of the bilateral trade. Japan and India have liberalized 92 % and 87.16% of tariff lines.
Commerce and Industry Minister Piyush Goyal will be visiting Washington from Monday with key officials to initiate contact with his counterpart US Trade Representative Jamieson Greer. The meetings in the US are expected to help both sides to get an idea of what “first tranche of multi sector Bilateral Trade Agreement (BTA)” should cover. The agreement of the BTA was reached between Prime Minister Narendra Modi and US President Donald Trump on February 13.
Negotiating a deep FTA with the US presents several challenges. Trump’s decision to impose 25% tariffs on Mexico and Canada despite finalizing the US Mexico Canada Agreement in 2019 reflects his skepticism toward free trade agreements, according to GTRI.
In the FTA the US may push India to open government procurement to American firms, reduce agricultural subsidies, weaken patent protections by allowing evergreening, and remove restrictions on data flows—demands India has resisted for decades and is still not prepared to accept, Srivastava said.
“Additionally, many trade issues typically covered in FTAs are already addressed under the Indo-Pacific Economic Framework (IPEF), where India is a member. Moreover, FTA negotiations will take time, and by the time an agreement is reached, Trump may have already imposed reciprocal tariffs, making the deal ineffective,” he added. Zero-for-Zero is the best option India has in the unfolding scenario as others like retaliation on tariffs would lead to an all out trade war that could significantly hurt India. By not acting also India can cut its losses. “India should quietly reduce its dependence on the U.S. by avoiding preferential treatment in oil purchases, defense deals, or other areas. The focus should be on strengthening domestic industries to prepare for the next phase of global trade,” Srivastava said.