US may lift penal tariffs on India after Nov, says CEA Nageswaran

Chief Economic Adviser V Anantha Nageswaran on Thursday expressed optimism that the US could withdraw its additional 25 per cent penal tariffs on Indian goods after November 30.

Speaking at an event organised by the Merchants’ Chamber of Commerce & Industry in Kolkata, Nageswaran highlighted recent geopolitical and economic shifts as harbingers of relief. “I still believe that geopolitical circumstances may have led to the second 25 per cent tariff, but considering the developments in the last couple of weeks and so on, I do believe... it is my intuition that… the penal tariff will not be there after November 30,” he said.

Nageswaran’s remarks come just two days after a marathon meeting between US Assistant Trade Representative Brendan Lynch and India’s chief negotiator and Special Secretary at Ministry of Commerce Rajesh Agrawal in New Delhi on the next step in trade talks. Both sides held a day-long meeting on Tuesday and decided to intensify efforts for early conclusion of a mutually beneficial Bilateral Trade Agreement, which was announced in February. The negotiations for the trade pact were postponed after President Donald Trump imposed 50 per cent tariffs on select Indian goods.

Initially, the US imposed a baseline 25 per cent reciprocal tariff on India to address perceived trade imbalances. However, in August, an additional 25 per cent penal duty was slapped on Indian goods, bringing the total to 50 per cent. The US cited New Delhi’s continued purchases of Russian oil amid the ongoing Ukraine conflict for the tariffs.

Nageswaran further anticipated broader resolutions, including a possible reduction of the base reciprocal tariffs to 10-15 per cent, within the next couple of months. “I do believe that there will be a resolution in the next couple of months on the penal tariff and hopefully on the reciprocal tariffs,” he said, underscoring ongoing bilateral talks.

According to Nageswaran, the external sector of the economy remains resilient, despite the global headwinds. “Trade continues to be robust in the current financial year,” he said, adding that the foreign exchange reserves were healthy.

The CEA’s intuition aligns with India’s robust export momentum, with shipments crossing $820 billion last financial year and eyeing the $1 trillion mark soon. This resilience, Nageswaran noted, positions India as a “healthy and open economy” capable of navigating such headwinds.