India Gains Concessions from US 'National Security' Tariffs on Metals, Autos, Pharma
In a significant development in bilateral trade relations, India has secured concessions from the United States on tariffs imposed under Section 232, which are related to national security concerns. These concessions cover key sectors including steel, aluminium, copper, pharmaceuticals, cars, and car parts. This places India among a select group of countries, such as the United Kingdom, Japan, and South Korea, that have received similar benefits under trade agreements with the US, as detailed in a joint statement released on Friday.
Market Access and Tariff Reductions
As part of the agreement, India has committed to providing significant market access by eliminating or reducing tariffs on all US industrial goods and a wide range of US food and agricultural products. This includes items such as dried distillers' grains (DDGs), red sorghum for animal feed, tree nuts, fresh and processed fruit, soybean oil, wine, and spirits. The statement emphasized that India will also address long-standing non-tariff barriers to trade in US food and agricultural products, aiming to resolve persistent concerns in these areas.
Specific Concessions and Quotas
The joint statement outlined specific benefits for India, including a preferential tariff rate quota for automotive parts subject to tariffs imposed under Proclamation 9888 of May 17, 2019. Additionally, contingent on the findings of the US Section 232 investigation into pharmaceuticals and pharmaceutical ingredients, India will receive negotiated outcomes concerning generic pharmaceuticals and ingredients. However, the exact nature of these concessions was not fully disclosed in the statement.
Significance of Section 232 Concessions
The Section 232 concession is particularly noteworthy as it is not subject to an ongoing US Supreme Court case that could challenge US President Donald Trump's authority under the International Emergency Economic Powers Act (IEEPA) to impose reciprocal tariffs. The Trump administration had extended beyond reciprocal tariffs to apply Section 232 tariffs on sensitive sectors, making this concession a critical element in the trade agreement.
Purchase Commitments and Technology Cooperation
India has expressed its intention to purchase $500 billion worth of US energy products, aircraft and aircraft parts, precious metals, technology products, and coking coal over the next five years. The joint statement also highlighted plans to significantly increase trade in technology products, including Graphics Processing Units (GPUs) and other goods used in data centers, alongside expanding joint technology cooperation. This aligns with India's announcement of a tax holiday for data centers, fostering a conducive environment for technological exchange.
Addressing Non-Tariff Barriers
Both countries have agreed to address non-tariff barriers that affect bilateral trade. India has committed to resolving long-standing barriers to trade in US medical devices, eliminating restrictive import licensing procedures that delay market access for US Information and Communication Technology (ICT) goods, and determining within six months whether US-developed or international standards are acceptable for US exports entering the Indian market in identified sectors.
Flexibility in Commitments
The statement included a clause allowing for flexibility, noting that in the event of any changes to the agreed-upon tariffs by either country, the United States and India may modify their commitments accordingly. This provision ensures adaptability in the face of evolving trade dynamics and policy adjustments.
This agreement marks a pivotal step in strengthening India-US trade ties, with potential impacts on economic policy, market operations, and bilateral cooperation in key sectors. The concessions and commitments outlined reflect a mutual effort to enhance trade flows and address longstanding issues, setting a foundation for future collaboration.
