Trade ministry begins expanding NAFTA wing as India seeks quick US tariff truce

A swift deal with the US is crucial for Indian exports, as several countries hit with high reciprocal tariffs—such as Vietnam and Cambodia—have signalled to the US their willingness to slash tariffs on American goods under a trade agreement. The US is also in talks with several other countries that have expressed interest in such deals.

Indian competitors for US deal

“Just had a very productive call with To Lam, General Secretary of the Communist Party of Vietnam, who told me that Vietnam wants to cut their tariffs down to ZERO if they are able to make an agreement with the US. I thanked him on behalf of our country, and said I look forward to a meeting in the near future,” US President Donald Trump said in a social media post.

Vietnam, facing 46 per cent US reciprocal tariffs, has also requested a delay of at least 45 days in the imposition of these duties to allow time for negotiations that could prevent a move detrimental to both the Vietnamese economy and American consumers. Vietnam’s tariffs on US goods stand at 9.4 per cent—lower than India’s tariffs on US imports.

Meanwhile, Cambodian Prime Minister Hun Manet has sought negotiations after the US government imposed a 49 per cent tariff on products from Cambodia. According to Chinese news agency Xinhua, Manet stated that Cambodia is committed to promoting US-based product imports, with an immediate reduction of tariffs on 19 product categories from a maximum bound rate of 35 per cent to a 5 per cent applied tariff rate.

India yet to sign a full-fledged deal with Western partner

However, India is yet to sign a full-fledged trade deal with any Western country due to significant differences over labour and environmental standards. India’s trade agreements with the European Union and the UK have been under negotiation for several years.

Commerce Secretary Sunil Barthwal at an industry event in March stated that businesses often lose interest in trade deals if negotiations continue for too long. He urged India’s trade partners to focus on core issues and consider beginning with a limited agreement driving home tangible results.

Selective concessions for countries will hurt India

An auto component manufacturer had told The Indian Express earlier this month that Indian exporters are not concerned if tariffs apply on all countries but “selective concessions” would affect India’s competitiveness.

“The White House said the tariff would apply not only to fully assembled cars but also to key automobile parts, including engines, transmissions, powertrain parts, and electrical components. That list could expand over time to encompass additional parts. As of now, engine components, powertrains, and transmissions are India’s largest auto component exports. From a competitive position, things remain the same. The problem will be if there are selective relaxations, if US demand slumps as goods become more expensive, or if China undercuts through opaque subsidies,” the source said.

Making a case for faster negotiations with the US, Rudra Kumar Pandey, Partner at Shardul Amarchand Mangaldas & Co, said that US reciprocal tariffs may have an immediate dampening effect on demand due to increased landed costs. However, India’s comparatively lower tariff rate—against Vietnam’s 46 per cent and China’s 34 per cent—creates a window of opportunity to boost its relative competitiveness in the US market.

“This differential could serve as a catalyst for the realignment of global supply chains, particularly for US companies looking to reduce dependence on China and diversify away from higher-tariff markets. India is uniquely positioned to benefit from this shift, especially in electronics and textiles, where it enjoys not only a tariff advantage but also a large and skilled labour force, rapidly expanding industrial infrastructure, and over $24 billion in incentives committed under Production Linked Incentive (PLI) schemes,” Pandey said.

US deal may not be easy

Indicating that the US would likely press India on a range of issues during trade talks, a report by the United States Trade Representative (USTR) expressed concerns about data localisation requirements for payment service providers and banks. The USTR report also stated that the US has placed India on the ‘Priority Watch List’ due to inconsistent progress on intellectual property (IP) issues. It cited the absence of specific laws for “trade secret protection” and long waiting periods for patent approvals as major concerns.

Additionally, the US has raised concerns over India’s price caps on coronary stents and knee implants, arguing that these controls have not kept pace with inflation and do not consider production costs or innovation, potentially discouraging US companies from operating in the Indian market.