India-US Trade Deal Likely To Retain Tariff Safeguard Amid Uncertainty Over Future US Duties

The India-US trade agreement, which was initially agreed upon in February, is expected to include a tariff safeguard in its final form, according to a government official. This provision allows either country to revise its commitments if the other alters previously agreed tariff terms, as reported by Moneycontrol. The safeguard aims to prevent concessions made by India from becoming permanent if Washington modifies its duty structure in the future.

The February 6 joint statement had already included this reciprocal action clause. The safeguard does not bar either nation from introducing new tariffs; instead, it gives the other country the option to adjust its own commitments if agreed duties are changed. While India had proposed reducing or eliminating tariffs on certain US industrial and agricultural products, the US agreed to an 18% reciprocal tariff on Indian goods, with additional concessions for specific items tied to the successful completion of the broader trade deal.

However, recent changes in US trade policy have complicated the arrangement, making the safeguard more crucial for New Delhi. The US is considering additional tariff measures that could affect India, including a 10% additional tariff on Indian exports under Section 301 related to forced labor concerns, and potential duties due to structural excess capacity.

Additionally, India faces uncertainty from proposed US legislation concerning Russia sanctions, which could allow the US president to impose tariffs of up to 100% on countries purchasing Russian energy. The pharmaceutical sector also faces potential challenges, with generic medicines facing a 100% tariff for one year and 200% thereafter under a phased US tariff plan.

Despite these uncertainties, both India and the US continue negotiations to finalize the trade agreement, with Commerce Secretary Rajesh Agrawal stating that both sides remain committed to advancing the February framework.