New Delhi, March 16 -- The interim trade agreement between India and the United States will be signed once Washington finalises its new global tariff structure, a senior government official said on Monday, indicating that both sides are waiting for clarity on the evolving tariff regime before formally concluding the pact.
India and the United States last month announced that they had finalised the framework for the first phase of a bilateral trade agreement. Under the arrangement, the United States agreed to reduce tariffs on Indian goods to 18 per cent, a rate that was lower than those applied to several competing economies.
However, developments in the US legal and policy framework have altered the timeline for signing the agreement. A ruling by the US Supreme Court against sweeping tariffs introduced by President Donald Trump led to changes in the tariff system.
Following the ruling, the US administration imposed a temporary tariff of 10 per cent on all countries for 150 days starting February 24.
Because of these developments, a meeting between the chief negotiators of the two countries that had been scheduled last month to finalise the legal text of the agreement has been postponed. The pact had earlier been expected to be signed in March.
"The deal was to be signed in March. When we said this, that time, the Supreme Court judgment on IEEPA tariffs had not come," the official said. The ruling related to tariffs imposed under the International Emergency Economic Powers Act.
"Now, with the Supreme Court judgment on IEEPA tariffs, the tariffs per se don't exist," the official added. Instead, tariffs are currently being applied under Article 122 provisions related to balance of payments crises, which allow duties to be imposed for five months. These tariffs are currently around 10 per cent.
Officials said the final signing of the agreement will depend on how the United States restructures its broader tariff framework. "The deal that we finalise and sign has to be against the tariff structure or the comparative advantage that India gets in the US market," the official said.
According to the official, Washington is in the process of building a new global tariff architecture. "Once they are on that pathway and are able to create that, I think at that juncture it would be right to sign the deal," the official said.
Negotiators from both countries have already completed the main elements of the pact and are now working through remaining details. "The pact has already been finalised and decided upon, and both teams are negotiating to iron out the finer details," the official said, adding that the signing will take place once the broader tariff system is clear.
India's earlier negotiated tariff rate of 18 per cent had placed it at a relative advantage compared with competitors such as China, Vietnam and Thailand. Officials noted that any changes to this rate will depend on how the new US tariff structure treats other countries. "If the global architecture is exactly the way the IEEPA tariffs were there, then it may also remain so. If it is different, then it may also change," another official said. If competing economies face tariffs of 19 to 22 per cent, India's rate may remain at 18 per cent, but it could be adjusted if other countries receive lower rates.
Officials said there is no disagreement between the two sides. "There is nothing that there is a standoff. There is nothing that the deal is not there," the official said.
The agreement focuses on providing comparative and preferential market access to both countries. Meanwhile, the United States has launched two investigations under Section 301 of its trade law. On March 12, the US Trade Representative initiated a probe covering 60 economies, including India and China, to examine policies related to the import of goods produced using forced labour. A day earlier, another Section 301 investigation targeted the industrial policies of 16 economies, again including India and China.
Officials in New Delhi said the government is reviewing the legal implications of these investigations.
"These investigations take time. My sense is whenever a trade deal is finalised and signed in the future, this will take care of these investigations," the official said. Commerce Secretary Rajesh Agarwal said India continues to work with Washington toward a mutually beneficial agreement.
Published by HT Digital Content Services with permission from Millennium Post.