India Waits for New US Tariff Architecture To Sign Trade Deal

Chennai: India is now waiting for the new US tariff architecture to sign the trade deal, said a commerce ministry official. After Malaysia became the first country to exit the US trade deal, experts opined that India should not sign the deal as neither does it provide any gains nor cuts exposure to further US trade action.

"Whenever the US is ready with the new tariff architecture, India will sign it," Commerce Secretary Rajesh Agrawal was quoted by PTI.

"The US deal was to be signed in March. International Emergency Economic Powers Act (IEEPA) tariffs don't exist per se due to US Supreme Court rulings now. Under Article 122, tariffs of 10 per cent exist globally now. Any deal that India signs will be signed against a tariff structure. The US is trying to recreate a tariff architecture globally. Once the US creates that, it will be better to sign then. Actual signing will be done when the new architecture of tariffs globally is done by the US," Agrawal said.

"At the end of it, each country is doing a deal as part of a package where one is at comparative advantage... vis-à-vis its competitors," he added.

The statement gained significance as Malaysia ruled the trade deal with the US as null and void, citing the collapse of the legal basis for the tariffs that supported it. The US Supreme Court struck down the reciprocal and punitive tariffs on its trade partners on February 20. Malaysia is the first country to withdraw from the deal with the US. Under the deal, Malaysia avoided tariffs that had initially reached 47 per cent, negotiating reductions first to 24 per cent and later to about 19 per cent. In return, Malaysia agreed to provide deeper market access and policy concessions to the United States.

In the case of India, the initial framework for the bilateral trade agreement was announced on February 1 and under it, the penalty tariff of 25 per cent imposed by the US on Indian exports would be removed and the reciprocal tariff reduced to 18 per cent from 25 per cent. After the Supreme Court order, both reciprocal and punitive tariffs are not applicable to Indian goods.

According to GTRI, the deals have lost economic importance and many countries will walk away from their deals. “After the court struck down the reciprocal tariff policy, Washington imposed a uniform 10 per cent tariff on all trading partners, meaning countries with trade deals now receive the same treatment as those without one,” said Ajay Srivastava, founder, GTRI.

Further, trade pressure from the United States continues even after agreements are signed as the US Trade Representative (USTR) launched two new Section 301 investigations against several major economies, including those with whom the US had signed a trade deal. Even such countries remain exposed to new US investigations and potential tariffs.