Optimism Grows Around Easing of Trade Tensions as US-India Talks Progress
India could soon see a rollback of the additional 25% penal tariff imposed by the US, potentially lowering the current 50% tariff rate on select Indian exports after November 30, 2025, according to Chief Economic Adviser (CEA) V Anantha Nageswaran.
Background: How Did the Tariff Hike Happen?
- In a move originally initiated under the International Emergency Economic Powers Act (IEEPA) by former US President Donald Trump, India was subjected to:
- 25% reciprocal tariff, and
- 25% additional penal tariff, totaling 50% duties on several Indian goods.
- These duties currently apply to all Indian products either entering or being withdrawn from warehouses for consumption in the US market.
What the CEA Said About Tariff Removal
During an event hosted by the Merchants’ Chamber of Commerce & Industry in Kolkata, CEA Nageswaran expressed confidence that the penal tariff could be removed soon:
“The original reciprocal tariff of 25%, plus the penal tariff of another 25%, were not anticipated. I believe recent geopolitical developments may lead to the removal of the penal tariff after November 30,” he said.
He added that continuous discussions between India and the US are paving the way for:
- Resolution on penal tariffs
- Potential future talks on reciprocal tariffs
India’s Trade Outlook Remains Positive
- India’s exports currently stand at $850 billion annually
- Projected to reach $1 trillion, contributing to 25% of India’s GDP
- Indicates strong trade resilience and an increasingly open economy
Not All Products Are Affected by the 50% Tariff
According to a US Customs notification, several product categories are exempted from the increased tariff:
Exempted from Additional Duties:
- Iron and steel, including derivatives
- Aluminium and its derivatives
- Passenger vehicles (SUVs, sedans, minivans, trucks)
- Vehicle spare parts
- Semi-finished and intensive copper products
Still Subject to 50% Tariff:
- All other non-exempt Indian imports
- Additional duties such as antidumping or countervailing may also apply
Despite Higher Duties, India Maintains Market Access
A report by the Global Trade Research Initiative (GTRI) highlights that:
- 30.2% of Indian exports to the US (worth $27.6 billion) continue to enter duty-free
- Shows India’s diversified export base and ongoing trade competitiveness
What’s Next?
- All eyes are on the post-November 30 period for an official announcement regarding tariff rollback.
- Positive developments may:
- Boost Indian export volumes
- Improve India-US trade ties
- Enhance investor and exporter confidence
