Zero-tariff US deal? There's zero chance!

India is unlikely to offer a 'zero-for-zero' tariff deal to the US as part of the Bilateral Trade Agreement (BTA) the two are negotiating, officials said, adding that such an arrangement can only be made between developed countries.

The BTA is likely to be a package deal comprising issues such as goods, digital trade, movement of professionals, technical barriers to trade and intellectual property rights, among others.

Talks this Week

The two sides will begin virtual talks this week, with some clarity on the deal expected by the end of May. "The government is examining all 11,000 tariff lines under the BTA and the deal will be a package, including issues such as tariffs on goods and non-tariff barriers, not sector-based," said an official.

Zero-for-zero tariffs are possible between developed entities such as the US and the European Union, he said. Under the zero-for-zero framework, a country identifies tariff lines or product categories on which it can eliminate import duties and, in lieu of that, the trade partner does away with duties on a similar number of goods.

Among other issues, Washington's interests include data localisation, government procurement and India's quality control orders, whereas New Delhi's focus areas are the long-pending totalisation pact and easier work visas.

India and the US aim to wrap up the first part of the BTA by September-October with the broader aim of more than doubling bilateral trade to $500 billion by 2030. "Work has started on the agreement," said the official cited, adding India is far ahead of other nations in negotiating a trade deal with the US.

Trump's 90-day pause on reciprocal tariffs until July 9, excluding China, has given India time to expedite BTA talks and conclude an interim or early harvest deal in the three-month period, officials said.

The BTA's terms of reference were finalised after senior members of the US Trade Representative's office visited India last month.

While the 26% reciprocal tariff on India has been on hold, the 10% baseline tariff remains in place. But that compares with 145% duty on China. Experts and lobby groups have suggested that India cut trade levies on 90% of industrial tariff lines if the US does the same. This strategy would cover a similar proportion of India-US bilateral merchandise trade. The US accounts for about 18% of India's total goods exports, 6.22% of imports and 10.73% of bilateral trade.

Washington is looking at duty concessions on certain industrial goods, automobiles, wine, petrochemicals, dairy, and farm produce such as apples, tree nuts and alfalfa hay. India could consider cuts on labour-intensive sectors such as apparel, textiles, gems and jewellery, leather, plastics, chemicals, oil seeds, shrimp and horticultural products.

The tightening of low-value ecommerce shipments from China by the US has opened up substantial opportunities for Indian online exporters as they can fill the gap if red tape is slashed and the government provides timely support, Delhi-based think tank GTRI said Sunday.

With over 100,000 ecommerce sellers and $5 billion in current exports, India is well-positioned to fill any gap left by Chinese goods, particularly in customised, small-batch products such as handicrafts, fashion and home goods.

From May 2, Chinese and Hong Kong ecommerce shipments under $800 to the US will face 120% import duty, ending their duty-free entry.