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India, US trade deal likely soon, huge tariff cuts on the horizon

New Delhi: India and the US are closing in on a long-pending trade deal that could slash the current tariffs for Indian exports to 15-16% from a punishing 50%, according to three people aware of the matter. With energy and agriculture emerging as key cards at the negotiating table, India may agree to gradually reduce its imports of Russian oil, the people cited above said on condition of anonymity. The purchases had prompted a punitive levy of 25% on Indian exports, which is over and above the 25% reciprocal tariffs announced in April. Currently, Russia accounts for about 34% of India's crude imports. About 10% (by value) of the country's current oil and gas needs are imported from the US. India may also allow in more non-genetically modified (GM) American corn and soymeal into its markets. Further, it is pushing for a mechanism to revisit tariffs and market access over time in the agreement. A key factor at play is China's increasing assertiveness on trade, tariffs and American corn. China has sharply reduced US corn imports from $5.2 billion in 2022 to just $331 million in 2024. And with overall US corn exports falling from $18.57 billion in 2022 to $13.7 billion in 2024, Washington is aggressively seeking new buyers. According to the people cited above, India is considering increasing the quota for importing non-GM maize from the US, even though the duty on these imports will remain unchanged at 15%. The current quota of American corn imports is 0.5 million tonnes annually. New Delhi is likely to consider the US request to allow greater market access for American corn in response to rising domestic demand from poultry feed, dairy inputs, and ethanol industries, the persons cited above said. "Talks are also advancing on permitting imports of non-GM soymeal for both human and livestock consumption. However, there is still no final clarity on tariff reductions for dairy products, including high-end cheese, even though it is a key demand from the US team," said the second person. The people cited earlier said that the finalisation of BTA is likely to be announced at the ASEAN Summit later this month between US president Donald Trump and Prime Minister Narendra Modi. However, neither has yet officially confirmed their participation in the summit. Queries emailed on 19 October to Union commerce minister Piyush Goyal, commerce secretary Rajesh Agarwal, the spokespersons of ministries of commerce and external affairs, and the USTR remained unanswered till press time. In response to a media query, the US Embassy in New Delhi said, "The embassy defers to the USTR on all inquiries regarding trade negotiations." According to the people cited earlier, the broad contours of the agreement are in place, but sensitive areas such as agriculture and energy need political clearance before the deal can be announced. From India's side, the deal is being negotiated by the commerce ministry along with the external affairs ministry and the national security adviser's office. While both sides have previously announced and missed deadlines, the Indian side is aiming for a November 2025 conclusion. On energy, the Indian side is considering allowing ethanol imports and gradually reducing purchases of Russian oil, with Washington expected to extend concessions on energy trade in return, said the first of the three officials cited above. The Indian side may not make any formal announcement on this front. Instead, state-run oil marketing companies are expected to be informally advised to diversify crude sourcing towards the US, this person said. The third person said that top Indian officials have visited Moscow and conveyed to their Russian counterparts that India will reduce crude imports from Russia. This person added that the White House has not yet agreed to match the discounts offered by Russia. Earlier, officials in the US administration made it clear that President Trump has set stopping Russian oil imports as a precondition for finalizing the trade deal, as reported by Mint on 25 September. To be sure, a Bloomberg report dated 8 October pointed to the slimming discounts from Russian crude. "The price gap between Russian and benchmark crude has narrowed sharply -- from over $23 a barrel in 2023 to just $2-2.50 per barrel as of mid-October -- making Middle Eastern and US crude more competitive," the report said. As a result, India saved a modest $3.8 billion in FY25 on its oil purchases as the discount on Russian crude shrank, the Bloomberg report said, citing credit rating agency Icra Limited. On 15 October, commerce secretary Agarwal had said that India is open to increasing its crude and gas imports from the US if prices remain viable for domestic refiners, as reported by Mint that day. India, on average, imports $12-13 billion worth of crude oil and gas from the US every year. There is headroom for an additional $12-13 billion in purchases without requiring any changes to refinery configurations, Agarwal had said, adding that India will consider buying more energy products, keeping in view the cost dynamics. Overall, India imported crude worth $137 billion in the previous financial year (FY25) compared to $133.4 billion in FY24, according to data from the Petroleum Planning and Analysis Cell. As per the commerce ministry data, bilateral trade between India and the US stood at $71.41 billion in H1 FY26, up by 11.8% from $63.89 billion in H1 FY25. Exports to the US grew by 13.4%, rising from $40.42 billion in H1 FY25 to $45.82 billion, while imports increased by 9% from $23.47 billion to $25.59 billion. Trade experts believe the US now appears ready for a deal with India, especially driven by China's hardening stance. "China's tighter control over rare-earth exports and the deepening US-China trade war are forcing Washington to rethink its strategy with allies as it seeks reliable partners to build alternative supply chains," said Ajay Srivastava, co-founder of the Global Trade Research Initiative (GTRI), adding that this could accelerate a deal with India, with "the US likely offering 16-18% tariff access -- higher than the 15% for the EU and Japan, but below the 20% for Vietnam". However, D.N. Pathak, executive director of the Soybean Processors Association of India (SOPA), said allowing soymeal imports from the US will not be a good move for the domestic sector. "Farmers are already struggling to get even the minimum support price for their produce, and any relaxation for foreign soyameal will push domestic prices down further," Pathak said. "Such a move could hurt local processors and discourage soybean cultivation at a time when the sector is already under pressure." A senior industry person from the corn sector said that even though India already has surplus ethanol production, allowing American corn into the market could help move the trade deal forward. However, this may lower corn prices in India, even as it creates a chance for ethanol exporters to export more in global markets. GTRI's Srivastava said the deal may move fast because Washington wants to give relief to India from the 50% tariffs that are currently hurting its exports. "Still, India must hold firm on its red lines in agriculture, digital trade, e-commerce, and intellectual property, and avoid any anti-China clauses that could limit its strategic autonomy," he said. "The agreement is likely to include a review mechanism that would allow both countries to revisit tariff levels and market access conditions after a fixed period, possibly a year, or as mutually agreed upon. The provision is being designed to ensure flexibility for future trade adjustments as market conditions evolve," the second person added.

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