India-US Trade Deal: 'Zero-for-Zero' Tariff Approach Unlikely
A 'zero-for-zero' tariff strategy, proposed by trade experts to deal with mutual tariff hikes by the US, will not be included in the India-US bilateral trade agreement, according to official sources. Such an approach is at variance with the normal negotiating practices for trade agreements, officials said.
A top official clarified that although a zero-for-zero approach where both nations remove tariffs on identical goods may be feasible between developed economies such as the US and the European Union, it is not appropriate for countries with varying economic structures, like India and the US. "Trade agreements do not work like this if they go zero on electronics, we will too. That is a wrong perception," the official said. Rather, India and the US are working towards a broader "package deal" that covers a range of issues, such as goods, services, and non-tariff barriers.
The bilateral trade agreement negotiations began in March, with both nations planning to complete the first phase by September or October this year. The goal is to more than double bilateral trade to $500 billion by 2030 from around $191 billion now.
The officials assured that sectoral talks will occur in the following weeks after four days of initial talks that ended on March 29. India is said to be ahead of other countries as far as being prepared for negotiations on trade agreements is concerned.
The zero-for-zero idea has been floated earlier by the Delhi based think tank Global Trade Research Initiative (GTRI), which had recommended that India remove tariffs on chosen American products in return for reciprocal concessions by the US. But the present stance reflects the Indian government's preference for a more comprehensive and symmetrical negotiating architecture.
On the issue of trade interests, the US is likely to push for tariff reduction in areas like industrial products, electric vehicles, wines, petrochemicals, dairy, and farm produce such as apples, tree nuts, and alfalfa hay. On the contrary, India will most probably negotiate duty reduction in labor-intensive industries like textiles, garments, gems and jewelry, leather, plastics, chemicals, oilseeds, shrimp, and horticulture.
The US has remained India's biggest trading partner over the last three fiscal years, with a contribution of around 18% to India's total exports, 6.22% to imports, and 10.73% to total bilateral trade. India had a goods trade surplus of $35.32 billion with the US in 2023-24, up from $27.7 billion in 2022-23. Principal Indian exports to the US in 2024 were drug formulations and biologicals ($8.1 billion), telecommunication instruments ($6.5 billion), precious and semi-precious stones ($5.3 billion), and petroleum products ($4.1 billion). US imports had crude oil ($4.5 billion), petroleum products ($3.6 billion), coal and coke ($3.4 billion), and parts of aircraft and spacecraft ($1.3 billion), among others.
