India, US lay foundation for trade give-and-take

India emphasized that the weighted tariff it levies has come down from 17% in 2023 to 10.66%, following changes in duty structures announced in the Union Budget for FY26, setting the stage for further negotiations in the coming rounds. The average weighted tariff is the actual tax that imported goods face on average, but it gives more importance to products that are imported in large quantities.

“This will form the basis of the talks, upon which the leadership and policymakers will further narrow down issues and decide on the give-and-take in the negotiations,” one of the two people mentioned above said. Contentious issues such as giving a level playing field for US firms and regulatory compliance were not discussed in detail due to the limited time available, the person added.

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“The talks were held in a very positive atmosphere. The US team was receptive and agreed to take discussions forward. These talks focused on defining the broader contours, and the visiting side concurred on continuing engagement to address specific trade issues and work towards a mutually beneficial agreement,” said the second person.

Queries sent to the spokespersons of commerce and external affairs ministries, as well as the US Embassy remained unanswered.

According to a senior government official, the three-day talks ended on Friday; however, since the US team is leaving on Saturday evening, there will be one more session to discuss some of the remaining issues. The US delegation is led by Assistant US Trade Representative Brendan Lynch.

Neither side discussed the fallout of reciprocal tariffs or any exemptions from them, the second person added. Even though India has implemented several pro-US measures, securing an exemption from reciprocal tariffs remains uncertain.

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To be sure, India has revised tariffs on several US products to address trade concerns. The import duty on bourbon whiskey has been reduced from 150% to 100%. Tariffs on Harley-Davidson motorcycles have been lowered from 50% to 30%, and the duty on ethernet switches has been cut from 20% to 10%. A day earlier, Trump told reporters that he may grant many countries “breaks” from reciprocal tariffs—without giving details.

On Tuesday, India’s tax regulator revised income tax rules to offer greater benefits to electric vehicle (EV) and EV battery makers. A circular from the Central Board of Direct Taxes (CBDT) expanded safe harbour rules by raising the eligibility threshold from ₹200 crore to ₹300 crore.

Additionally, lithium-ion batteries for electric and hybrid vehicles have been classified as core auto components, making them eligible for tax benefits. These changes are seen as part of India’s strategy in the ongoing trade talks, where it is seeking better market access for its exports.

On Thursday, the Directorate General of Foreign Trade (DGFT) extended the export obligation for walnuts imported under the Advance Authorization Scheme, aligning it with the standard 18-month timeline applicable to most other products.

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The Export Obligation Period (EOP) refers to the time frame within which an exporter must fulfill export commitments under various trade policies and incentive schemes. This will help US exporters as about 66% of walnuts are imported from the US, and due to the shorter time frame of 180 days, importers bring in smaller quantities since they have to re-export after processing to get tax benefits. Now, that the norms have changed, importers will import more, and the US is the immediate beneficiary, according to a Global Trade Research Initiative (GTRI) report.

The US is one of India’s largest trading partners. Bilateral trade in goods and services reached around $190 billion last year, reflecting the deep economic ties between the two nations.

India enjoys a trade surplus of $36.8 billion with the US, largely driven by exports of pharmaceuticals, textiles, and IT services, while key imports include crude oil, aircraft, and agricultural products.

Agricultural exports to the US have witnessed a steadily increasing trajectory, rising from $1.93 billion in FY22 to $2.02 billion in FY23 and further to $2.12 billion in FY24, commerce ministry data showed. By February of FY25, exports had already reached $2.28 billion. Key agricultural products exported to the U.S. include spices, cereal preparations, rice, meat, dairy and poultry products, tea, coffee, and tobacco.

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According to the joint statement issued on 13 February after the meeting between Indian Prime Minister Narendra Modi and US President Donald Trump in Washington, both leaders agreed to expand bilateral trade between the two countries from $200 billion to $500 billion over the next five years.

“Indian negotiators should negotiate firmly with the US and keep agriculture out of the discussions. The U.S. side may not have a mandate to cut any of its tariffs and is primarily here to press India for unilateral concessions on most issues,” said Ajay Srivastava, founder, Global Trade Research Initiative (GTRI).