India and the United States are approaching a long-awaited trade agreement aimed at lowering US tariffs on Indian imports to between 15% and 16% from the current rate of up to 50%. The deal, which focuses on energy and agriculture, may lead India to gradually decrease its imports of Russian crude oil. This development is consistent with Washington’s broader geopolitical strategy and follows recent high-level discussions between the leaders of both nations. The proposed agreement, reportedly in its final stages, involves a significant policy exchange. The US is willing to reduce import duties on various Indian products to a range of 15-16 percent, representing a marked decrease from the existing tariffs.
This reduction would considerably enhance the competitive position of Indian exporters, particularly in crucial sectors such as textiles, pharmaceuticals, and engineering goods. In exchange for these concessions, India is anticipated to commit to two primary actions. The foremost is a commitment to gradually lessen its purchases of Russian crude oil, aligning with the US’s longstanding goal of limiting Moscow’s energy revenues. Additionally, the agreement would allow for increased imports of US agricultural products, including non-genetically modified corn and soymeal, into India’s protected agricultural market. Progress on this deal follows recent high-level discussions, including a phone conversation between Prime Minister Narendra Modi and President Donald Trump.
Although the call was officially to exchange Diwali greetings, Trump also indicated that trade and energy were part of the conversation. Modi acknowledged the call on social media, thanking Trump for his greetings and emphasizing a united front against terrorism, without mentioning trade or any agreement on Russian oil. Despite the lack of clarity in diplomatic communications, officials involved in the negotiations are reportedly working toward finalizing the agreement, with a formal announcement expected at the upcoming ASEAN Summit. If completed, this deal would mark the most significant advancement in US-India trade relations since discussions stalled in 2020 due to tariff disputes.
The United States remains one of India’s largest trading partners, with total trade surpassing $200 billion in recent years. Trade experts suggest that the agreement would be advantageous for both sides, enhancing Indian exporters’ access to the US market while providing American farmers greater access to India’s substantial consumer base. Nonetheless, the reported condition regarding Russian oil puts New Delhi in a challenging position.