India to re-assess US Trade tariff terms amid legal uncertainty and competitive concerns

NEW DELHI : India is expected to review the tariff treatment being extended to competing exporting countries before finalising any new tariff commitments under the proposed trade agreement with the United States, according to a senior government source. The matter is likely to feature prominently during the next round of bilateral trade talks scheduled for June.

The development comes amid legal uncertainty over Washington’s reciprocal tariff regime of up to 50 percent, introduced earlier this year under emergency powers. In May, the US Court of International Trade invalidated these duties, ruling that the International Emergency Economic Powers Act (IEEPA) did not grant the administration authority to impose broad-based import tariffs.

“The previous understanding was based on a 50 percent tariff structure. The court has now overturned that framework. At present, a temporary 10 percent tariff is in effect, but it is set to expire in July. In such a scenario, what benchmark should be used to negotiate a higher tariff?” the source said on condition of anonymity.

The remarks come ahead of an anticipated visit by a US delegation to India in June for the next round of trade negotiations, as both countries work toward an interim arrangement covering tariff reductions and enhanced market access across key sectors.

“Why should India agree to an 18 percent tariff unless there is a genuine risk of facing a higher duty? Equally important, we need clarity on the tariff treatment being offered to our competitors. India should receive preferential market access compared to competing economies,” the source added.

In February, India and the United States agreed on a framework for an interim Bilateral Trade Agreement (BTA), under which tariffs on Indian-origin goods would be reduced from an effective 50 percent level to 18 percent.

Under the arrangement, the additional 25 percent duty imposed by Washington in response to India’s purchases of Russian oil was withdrawn immediately, bringing the effective tariff on Indian exports down to 25 percent. The interim framework envisaged a further reduction to 18 percent.

However, subsequent judicial rulings challenging the Trump administration’s tariff measures, combined with the introduction of a temporary 10 percent tariff under Section 122, have created uncertainty regarding the final tariff structure applicable to Indian exports, officials said.

The proposed arrangement had been negotiated when the Trump administration’s reciprocal tariff framework remained in force, and trading partners faced the possibility of significantly higher duties if negotiations failed.

The 10 percent tariff imposed under Section 122 of the Trade Act of 1974 allows for temporary import restrictions but is scheduled to expire in July. This has prompted New Delhi to reassess the basis on which future tariff commitments should be negotiated.

At the same time, the Indian government is closely monitoring a parallel Section 301 investigation launched by the Office of the US Trade Representative (USTR), which examines foreign trade practices considered unfair or restrictive to US commerce. The investigation covers issues such as manufacturing overcapacity, labour standards, market access barriers, and other policies affecting American businesses.

Officials note that any trade measures resulting from the Section 301 process may have a stronger legal footing than the reciprocal tariffs that were struck down by US courts.

Against this backdrop, Indian negotiators are evaluating the tariff structure that may ultimately emerge, while also assessing whether competing export economies could secure more favourable treatment, the source said.

India has already submitted its response and representations to the USTR as part of the consultation process and continues to engage with the US side on concerns raised under the investigation, even as broader trade negotiations continue.

Source : Moneycontrol