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US President Donald Trump on Tuesday said that the US will bring down tariffs on India, and that Washington and New Delhi are close to signing a trade deal. India is currently facing the highest tariffs of 50 per cent on any country globally, primarily due to additional duties on the purchase of Russian oil.
“Right now, the tariffs are very high on India because of the Russian oil, and they have stopped doing the Russian oil… It’s being reduced very substantially. We will bring the tariffs down at some point,” Trump said during a White House press briefing.
During the swearing-in ceremony of Sergio Gor, US Ambassador to India and Special Envoy to South and Central Asia, Trump said: “I’m trusting Sergio to help strengthen one of our country’s most important international relationships, and that’s the strategic partnership with the Republic of India. It’s a big deal.”
“India is home to one of the world’s oldest civilisations, the largest country in the world, actually, and it’s got over 1.5 billion people. We have a fantastic relationship with Prime Minister Modi, and Sergio is only enhancing that because he’s already become friendly with the Prime Minister. It’s a very important relationship, but it’s also the fastest-growing middle class, and an important economic and strategic security partner in the Indo-Pacific region,” Trump said.
After the US and China dialled down tensions last month, the focus shifted firmly to India, which Washington has long seen as a counterweight to Beijing’s influence in the region. Trade experts said India needs to target a 15 per cent tariff concession in line with what the UK and Japan have received, as Indian products may not be competitive compared to Chinese goods, even with a 20 per cent difference in tariffs with the neighbour.
The 15 per cent tariff rate would also be ideal for India because the US has kept tariffs at 20 per cent on Vietnam and 19 per cent on ASEAN countries such as Malaysia and Cambodia. ASEAN and India are the two regions seen as part of the “China plus one” strategy for global companies. A lower rate compared to Vietnam is especially crucial for India, as Vietnam is rapidly boosting goods exports and, at its current growth rate, could surpass India’s total goods exports despite being a much smaller country.
India is expected to step up energy imports from the US. This could also help New Delhi secure a more favourable tariff rate of between 15 and 20 per cent. However, the ongoing US Supreme Court case could impact the dynamics if the Trump administration loses.
Commerce Minister Piyush Goyal had said in September that India is a large importer of energy and that its energy security goals will have a “very high element” of US involvement in the years to come. Expressing interest in Small Modular Reactor (SMR) innovations in the US, Goyal said that both countries will also continue to work together in the nuclear energy sector going forward.
Both SMR and oil purchases feature in the US deal with Hungary too. Hungary and the United States, earlier this month, signed a Memorandum of Understanding on Nuclear Energy, stating that both parties intend to start negotiations to facilitate cooperation across the civil nuclear industry, including Small Modular Reactors (SMRs) and spent fuel storage.
“The United States and Hungary are collaborating to make Budapest a hub of the emerging Central European SMR market, deploying market-leading US nuclear innovation to jumpstart a new transatlantic industry. Hungary signalled it intends to support the construction of up to 10 SMRs with a potential value of up to $20 billion,” the joint statement said.
