India to continue negotiations with US for trade deal but no compromise on agri, dairy

India will continue discussions with the US on the proposed trade deal despite the additional 25% tariffs imposed by US President Donald Trump on Wednesday over India’s purchase of Russian oil. This takes the total to 50%.

Sources have indicated that while India remains hopeful of a bilateral trade deal, it is unlikely to buckle on key sectors like agriculture, dairy and crude oil.

“The sixth round of negotiations with the US team will take place later this month from August 25. There remains optimism of a breakthrough in talks,” said a source privy with the development, adding that the proposed additional tariff of 25% by the US is seen more as a bargaining tool or pressure tactic.

The additional penalty of 25%, which is above the 25% tariff already announced, will come into effect from August 27. Sources indicated that both the US and India are hopeful of a breakthrough in talks. But India will not compromise on agriculture and dairy.

The government is also understood to be taking feedback from various ministries and stakeholders to understand the impact of the proposed tariffs as well as any additional incentives that the country can offer the US as part of the trade talks.

Meanwhile, the Centre is also looking at extending support to exporters to offset the impact of the tariff hike. Commerce and Industry Minister Piyush Goyal has already met with exporters over the last weekend to understand their requirements.

There are concerns about the impact of the tariffs on micro, small and medium enterprises, several of which are fully export-oriented units.

At present, pharma and electronics imports are exempt from the tariffs. The 50% US tariff rate on India to 33.8%, from 18.8% previously, Nomura said in a note, adding that if effective, it would be similar to a trade embargo, and will lead to a sudden stop in affected export products.

“The lower value addition and thinner margins across a number of industries (textiles, gem and jewellery) could jeopardise operations, especially of smaller firms that will struggle to compete. The effective tariff rate also makes the burden on India similar to that of China and much higher than ASEAN economies (19-20%), putting India’s goods at a significant disadvantage,” it further said.