India threatened to impose retaliatory tariffs on certain U.S. goods

The Indian government took a significant step last Friday. Despite seeking to reach a trade agreement with the United States in the coming days, it has remained “steadfast in its stance” and threatened to impose retaliatory tariffs on certain U.S. goods. As reported by Bloomberg, New Delhi has proposed to the World Trade Organization (WTO) to levy retaliatory tariffs against the U.S. In response to the U.S. increase in tariffs on some Indian-produced automobiles and components, New Delhi will “impose equivalent tariffs on specified products of U.S. origin.” However, India has not specified the tariff rates or the exact list of goods subject to these tariffs.

The report notes that India has accused the U.S. of raising tariffs as a “safeguard measure” to protect American industries, which would create an unfair impact on Indian exporters. Washington’s 25% tariffs on Indian automobiles and certain auto parts are expected to affect $2.89 billion worth of Indian exports.

India has indicated that it reserves the right to withdraw or amend this notification, implying that the proposed retaliatory tariffs could be rescinded, contingent on Washington’s response to the proposal.

Bloomberg commented that while India has previously threatened to impose retaliatory tariffs, it has not yet executed such measures. This latest move may constitute a negotiating strategy, as both sides aim to finalize the agreement just days before the “reciprocal tariffs” come into effect.

India’s Minister of Commerce and Industry told reporters in New Delhi that India refuses to rush into concluding a trade agreement. “India negotiates from a position of strength, not under the pressure of deadlines.” “An agreement can only be reached when there is mutual benefit.”

The Indian delegation led by the chief negotiator concluded another round of trade talks with the U.S. on the 4th. Citing an Indian official, the Press Trust of India reported that the Indian delegation has returned from Washington, with both sides still needing to resolve issues in the agricultural and automotive sectors.

New Delhi has expressed willingness to reduce certain tariffs to ease trade tensions. However, Reuters notes that India continues to resist U.S. pressure to liberalize its agricultural and dairy sectors—a long-standing point of contention in previous trade negotiations.

According to India’s Business Today, these sectors are of high political sensitivity and significant economic importance to India’s rural population. India has never opened its dairy sector in any previous trade agreements. Given that the majority of Indian farmers engage in small-scale subsistence agriculture, the government is reluctant to risk exposing domestic farmers to subsidized U.S. imports that could undermine their livelihoods.

The Indian think tank Global Trade Research Initiative stated: “Reducing tariffs on U.S. agricultural products could jeopardize India’s food security, as it would expose smallholder farmers to risks from cheap subsidized imports and global price fluctuations. India must maintain tariff flexibility to protect the livelihoods of over 700 million rural people. There is no better outcome than the U.S. removing the 10% baseline tariff on Indian goods, but India should not open up its key sectors merely to have this 10% tariff lifted. India should proactively diversify its export markets to minimize dependence on the U.S.”