India may receive preferential tariff treatment under a proposed trade deal with the US, potentially shielding it from steep reciprocal tariffs set to hit other nations starting August 1.
“The US deal is all about preferential treatment,” a senior government official was quoted as telling the Informist.
India’s trade delegation, led by Special Secretary and chief negotiator Rajesh Agrawal, is currently in Washington to finalize the agreement.
Preferential access could mean lower duties for Indian goods compared to those from countries like Vietnam. For instance, if Vietnamese goods face a 20% US tariff, Indian exports may be taxed less under the emerging arrangement.
The negotiations come amid a broader US tariff overhaul. President Donald Trump has begun notifying individual countries of upcoming reciprocal tariffs. While Trump had announced a 26% duty on Indian goods in April, no formal notice has yet been sent to New Delhi. Recent letters to other nations reportedly differ from the initial April announcements, adding uncertainty to the final tariff structure.
Industry insiders in India are optimistic that a preliminary deal will be inked before the August 1 deadline, helping avoid potentially damaging levies.
The stakes are high. The US is India’s largest export market, accounting for more than 15% of outbound shipments. In FY24-25, India exported $86.51 billion worth of goods to the US, posting a trade surplus of $40.82 billion, according to the commerce ministry.
Should the US impose the 26% reciprocal tariff, it could significantly undermine that trade advantage and hit Indian exporters hard.
The preferential treatment under discussion may be India’s best shot at preserving market access in an increasingly protectionist US trade landscape.
