India, US postpone trade deal talks after Donald Trump tariff verdict

Move comes as Washington trying to figure out legalities

A team headed by India’s chief trade negotiator for the US, Darpan Jain, has postponed the visit to Washington DC amid the uncertainty surrounding the tariff situation following the Supreme Court judgment. The team was scheduled to travel on Sunday for three-day talks to finalise the legal text for the negotiated interim trade deal. 

 

“The two sides are of the view that the proposed visit of the Indian chief negotiator and the team be scheduled after each side has had the time to evaluate the latest developments and its implications. The meeting will be rescheduled at a mutually convenient date,” sources in the commerce ministry said.

 

“Our countries continue to work towards signing the bilateral trade deal,” the US Embassy spokesperson said in response to Business Standard queries.

 

After the US Supreme Court revoked President Donald Trump’s authority to use the International Emergency Economic Powers Act (IEEPA) for imposing country-specific “reciprocal” tariffs on Friday, Trump imposed a blanket 10 per cent surcharge on all countries for 150 days, vowing to raise it to the permissible ceiling of 15 per cent under Section 122 of the Trade Act. Trump also ordered new investigations under other laws that could allow him to reimpose the tariffs.

 

A government official said there is a “pause” in the negotiations as the US was trying to figure out the legal structure. “The contours of the trade deal need to be reworked now,” the official said, requesting anonymity. A second official said India had shown commitment to continue engagement with the US on the trade deal.

 

Both countries had issued a joint statement on February 7 outlining the contours of an interim trade agreement, and had aimed to sign the deal by March-end. The US removed the 25 per cent punitive tariffs imposed on India “in recognition of India’s commitment to stop purchasing Russian Federation oil” and agreed to further lower the existing 25 per cent to 18 per cent by February-end.

Trade economist Biswajit Dhar said that India should renegotiate the deal and clarify issues that were hanging in the air with respect to areas such as agriculture and digital trade. “At the same time, it is important to maintain a fine balance. We need to negotiate as equals. We all knew that the regime under Trump will be volatile but it is far more volatile than we expected. As a result, we need to take a step back and work out an alternative strategy to deal with Trump,” he said.

 

Director-General and Chief Executive Officer of Federation of Indian Export Organisations (FIEO) Ajay Sahai said that now there was a level-playing field for India because every country would now be subjected to a 15 per cent tariff.

 

“Going ahead, the challenge is the uncertainty regarding the other (tariff) measures that the US administration may implement. From India’s perspective, since we are engaged with the US for a trade agreement, the uncertainty may get over. BTA (bilateral trade agreement) is important for India because it covers areas beyond tariff. With a BTA, we will be in a position to negotiate and bring down the (US) MFN (most favoured nation) rate to zero,” Sahai said.

 

Madhavi Arora, chief economist at Emkay Global Financial Services, said most nations were likely to reassess trade deals concluded with the US. “With the latest developments, India’s effective tariff rate is now likely to be 11-13 per cent. This compares favourably to China, whose effective rate is likely to be above 15 per cent, while most other Asian peers will have similar effective tariff rates to that of India. We think, it is likely that the deal will be renegotiated with a view toward making it more equitable, with India under less pressure now to make large concessions,” she added.