Not closed to trade talks, but deal would not be ‘practical’ with 50% tariffs in place: Official

The removal of the additional 25% tariff on India is not a prerequisite for trade negotiations to resume between India and the U.S., but a trade deal would not “be practical” if these tariffs were to remain, according to government sources.

They added that while negotiators from both sides are in contact, formal negotiations have not yet resumed and the date for the next formal round has not been decided. The government is also working on addressing the liquidity-related short-term issues that exporters have voiced concerns about.

“The formal round that was scheduled for the end of August has been postponed,” a source said. “We have not finalised the date yet because with the overhang of the additional tariff, it was not practical to have official level discussions on the entire BTA package.”

“Everything is on the table, but we understand that both (the 25% reciprocal tariff and the 25% penalty tariff) will have to be resolved together,” the official added. “We hope to get back to the table soon.”

However, he stressed that the Indian government did not see the removal of the 25% penalty tariffs as a “precondition” to resume the BTA talks.

Support for exporters

“The export bodies have asked for various types of support such as interest subvention, moratorium, and credit support, which we are considering,” the source said. “One main issue they raised was on liquidity, and the government is working on ways to address this.”

Notably, the government is also aware of the limitations of its support measures.

“Export promotion incentives cannot be very high, they can only be a few percentage points,” the official explained. “But right now, for the sectors getting hit, there’s virtually a trade embargo in place. You can’t export with 50% tariffs. The incentives cannot fix that.”

However, the government also believes that the medium-term impact of these tariffs would be mitigated through the liquidity measures it takes, the ongoing efforts to diversify India’s exports, the other Free Trade Agreements (FTAs) India has signed, the strength of domestic demand, and the Export Promotion Mission the government will launch soon, the official said.