As the July 9 deadline for a potential India–US trade agreement draws near, all eyes are on whether India can secure a more favourable tariff regime. The key question: Will Indian exports be subjected to a 10% tariff or face higher duties of up to 26%?In a wide-ranging discussion with CNBC-TV18’s Latha Venkatesh, Ajay Srivastava, Founder of Global Trade Research Initiative, and Sivaramakrishnan Ganapathi, Vice Chairman & MD of Gokaldas Exports, explored the implications of the proposed tariff structure and the likelihood of a deal.
Srivastava clarified the US stance, stating, “They want 10% as their base tariff… Indian goods, if the FTA is concluded, will pay existing MFN tariffs plus 10%.” He added that in return, India is expected to lower its MFN tariffs, “except on agriculture and dairy maybe,” marking them as red lines in the negotiation.
From an exporter’s perspective, Ganapathi said, “Currently we have tariffs approximating 15–18% on average, and then there’s a 10% on top of it. The real question is: what is the relative tariff compared to our competitors?” He noted that while a 10% incremental duty may strain demand in the US market, “if India does have a differential tariff which is advantageous for us, then that will be great from a sourcing standpoint.”Below are the edited excerpts of the conversation:Q: What have you made of this statement itself, that there could be a deal? Are you reading this as a likelihood of a tariff between 10% and 36%? By the way, I believe it is 36% — would it be 10% plus 26%?Srivastava: It is 26%. It’s not 10% plus 26% — it’s 26% or 10%. They want 10% as their base tariff. That is a new zero for the US. They say their MFN tariff, the normal tariffs which the US or India charge on imports, will remain there. They’ll be kind enough not to charge 26% and instead charge only 10%. So Indian goods going to the US, if the FTA is concluded, will be paying existing MFN tariffs plus 10%.For example, for many governments, tariffs range between 8% and 20% — so those will continue, and 10% more will be added from the US side.In return, India will be cutting all MFN tariffs, except maybe on agriculture and dairy.Q: I know it’s speculative, but assuming we strike a deal, and it’s 10%, what exactly will be the tariff on your products — on apparels — and how competitive will they be?Ganapathi: Currently we have tariffs ranging approximately 15–18% on average for the goods we export. Then there is a 10% tariff on top of it. If that status quo remains, what matters for India is the relative tariff. There are a bunch of countries exporting to the United States — China, Vietnam, Bangladesh, India, and several others. It all depends on the relative tariff, which shapes the competitive landscape.We also need to know whether it’s 10% or even higher — the incremental tariff needs to be seen. If I look at the market, I feel that the US market with tariffs will face some stress in terms of rising prices. We’ll have to see how that impacts demand.However, if India does have a differential tariff that’s advantageous, then that will be great from a sourcing standpoint. We’ll likely see much more sourcing shift to India. So we’re waiting to see what happens to us — and what happens to others.Read Here | India-US trade deal crucial for business confidence and growth: USIBC, USISPF ChiefsQ: Am I right in guessing that our major competitors are Vietnam, Sri Lanka, Bangladesh, Philippines and China? Would that be the main competitors in your area, Mr Sivaramakrishnan?Ganapathi: Largely, apart from China.Q: They’re also in for much higher tariffs, even as a base case. Vietnam, Sri Lanka, and Bangladesh are likely to face higher tariffs. So do you think Indian apparel exporters will face stress because consumers may buy less at a higher price, but you’re not losing the market to competition?Ganapathi: You could say that, by and large. But we also need to know — the 46% mentioned for Vietnam may or may not be the final tariff for them. They are also negotiating with the US, and there’s a chance that may come down. Again, no one knows — we have to wait and see how that pans out.I maintain that as long as India has a relative tariff advantage, we’ll be better placed in the US market.Q: The chatter, Mr Srivastava, seems more with Britain, EU, India and Japan. I haven’t heard too many statements from Donald Trump or his secretaries on any other country. Should we expect, as Mr Sivaramakrishnan fears, that something positive may come even for Bangladesh, Vietnam, etc.?Srivastava: The US is currently negotiating with more than 20 countries. We have to be very clear — these are not normal FTA negotiations. In FTAs, both sides cut their MFN tariffs. But here, the US doesn’t want to touch its MFN tariffs.For example, they already have an FTA with Vietnam with zero tariffs on garments, but now they’re threatening them with higher tariffs and renegotiating. This is a different kind of negotiation where the US is calling the shots.
I’ve been speaking to friends in three or four countries — things are not moving. For example, with Japan, the US doesn’t want to cut tariffs on Japanese cars, so that’s stalled. Europe is also not moving forward. Vietnam is trying, despite already having an FTA — still, things are in limbo.Apart from India, no country is at an advanced stage where we can say a deal is likely in the next few days. These talks may stretch beyond the July 8 deadline.Q: What are you expecting as a base case on July 9, never mind the speculation, Mr Srivastava?Srivastava: There’s no official update. What we’re hearing from both Indian and US sources is that India has flagged red lines for agriculture, dairy and genetically modified crops (GMO). In return, India wants lower MFN tariffs on labour-intensive goods like garments, textiles, leather, handicrafts, etc., so we can claim something substantial at home. Otherwise, it will be a one-sided deal.If the India–US deal doesn’t go through, the US push for “Liberation Day” tariffs will fall flat. Except for the UK, no other country has signed on. If India backs out, the US position will weaken globally. I think they will realise this — and there may be a deal.Q: Mr Sivaramakrishnan, what’s the base case you’re working with? Again, it’s speculative, but we all need something to plan with.Ganapathi: Our base case is status quo — the underlying tariff remains, and the 10% continues. I don’t think it’s practical to expect a trade deal conclusion by July 8, given the number of countries still in discussions. This might just get extended. That’s the working assumption right now.Q: There’s already chatter that Trump may postpone again — from April 9 to July 9, and maybe again. That may not be politically tenable. So Mr Srivastava, can he announce an India deal and status quo for others? Because this matters to people like Mr Sivaramakrishnan.Srivastava: If the deal happens, then as Mr Sivaramakrishnan said, status quo continues. But if there’s no deal, then the 10% becomes 26% — plus the existing MFN of 18%, 20%, or 25%, depending on the product.So yes, I believe the US understands this. They must get India on board to avoid appearing weak.Read Here | Commerce Minister Goyal stresses ‘India does not negotiate with a deadline’ on US trade deal talksQ: Which of our products are vulnerable? I doubt Harley-Davidson or imported alcohols matter to us. But items like corn, cotton, and soyabeans — are they at risk?Srivastava: Less than 5% of US exports to India are agriculture and dairy. Over 95% are industrial products. We face no real threat from the US on that front.Agriculture is not just a trade issue — it’s a livelihood concern for half our population. Our productivity is low, and we can’t afford to tinker with it. So yes, agriculture and dairy are our red lines.The US isn’t present in most industrial goods. They focus on high-tech items like semiconductors. Beyond that, their exports are weak — we needn’t worry if we ring-fence agriculture and dairy.Q: They’re pushing Japan to open rice imports. With India’s procurement policies, will the MSP system be hit? Will procurement have to stop?Srivastava: They’re not just targeting tariff cuts — they’re also going after MSP. If we don’t have tariff protection, highly subsidised and mechanised US rice and wheat could flood our market.That’s what happened in parts of Africa. Countries dropped tariffs, cheap imports came in, local farmers couldn’t sell, and next year they stopped sowing. It led to famine. We cannot afford that in India. Agriculture must remain a no-go zone. It’s not a trade subject for us.Q: Finally, Mr Sivaramakrishnan, what’s the current status? Are you able to sell at 10% plus 18%?Ganapathi: Yes, we are selling. That underlying 18% tariff is always there — the 10% is incremental.We did see some slowdown in order placement initially. Buyers are uncertain about the post–July 9 tariff, so they’re holding off on large decisions. That said, we’re still seeing reasonable order flow, so nothing has materially slowed yet.Q: I thought there’d be a surge in advance orders, anticipating higher tariffs. No such trend?Ganapathi: We haven’t seen that trend yet.Also Read | India notifies WTO of retaliatory tariffs on US auto goods amid trade talks
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