Crucial discussions in Delhi for trade agreement between India and US

India and the US are making continuous efforts to finalise the first phase of a proposed trade agreement. As part of this process, a two-member team from the US visited Delhi between November 2-3. A senior official of the Government of India stated on Tuesday that during this visit, both sides held in-depth discussions on the customs and trade facilitation chapter of the proposed agreement.

Last week, the US reaffirmed its commitment to its relations with India. This step was taken to dispel concerns that trade negotiations with New Delhi could be disrupted due to the Republican Party's defeat in the US midterm elections. A spokesperson for the US Embassy in Delhi told Mint on November 4 that US President Donald Trump maintains full control over US foreign policy, including the trade agenda. The spokesperson further added that the midterm election results would not change their commitment to strengthening the partnership with India.

Indian experts view this situation as both a challenge and an opportunity. They believe that a Congress under Democratic control could make the ratification process of the trade agreement more difficult. On the other hand, Trump's political setback could provide New Delhi with an opportunity to be more influential at the negotiating table.

Economically, the US is the largest export market for India. In the financial year 2025-26, merchandise exports stood at $87 billion, which is approximately one-fifth of India's total merchandise exports in FY 26. According to experts, this agreement will provide Indian exporters with more clarity regarding the US tariff policy, enabling them to determine contract prices with greater confidence. Additionally, any increase in exports would provide timely support to the Indian economy, which is facing the impacts of the ongoing war in West Asia.

If this agreement is implemented, labour-intensive sectors are likely to benefit the most. This includes textiles, garments, leather goods, as well as gems and jewellery, as these sectors currently face the highest duties imposed by the US. In return, India may reduce tariffs on selected American agricultural products and increase the purchase of crude oil and liquefied natural gas (LNG) from the US. Experts add that the agreement also aims to deepen cooperation in defence technology and critical minerals.

Currently, there is an uneven tariff system on India's exports to the US. General Most-Favoured-Nation (MFN) duty applies to approximately 55% of shipments, including engineering goods, textiles, garments, and gems and jewellery. Along with this, a punitive export duty of 10% has been imposed on exported goods due to alleged use of forced labour. In textiles and garments, the American MFN duty can be up to 32%, while for most gems and jewellery, it ranges between 5.5% and 6%.

On the other hand, 35-40% of goods, including smartphones, pharmaceuticals, and certain agricultural products, have been exempted from these levies. However, a very high tariff of around 50% applies to the export of steel and aluminium. Immediate responses were not received to queries sent by Mint to the US Trade Representative, the US Commerce Secretary, the US Embassy in Delhi, and the spokesperson for the Indian Ministry of Commerce.