Credit: CFP

AsianFin -- India is offering to sharply reduce its average tariff gap with the United States to less than 4%—down from nearly 13%—as part of a proposed trade deal that could shield the country from current and future tariff hikes by the Trump administration, according to two sources familiar with the negotiations.

The move would mark one of the most significant overhauls of India's trade policy in years, cutting the unweighted average tariff differential between the two countries by 9 percentage points.

The offer comes as Washington ramps up efforts to finalize bilateral trade deals following last month's 90-day pause on a sweeping set of reciprocal tariffs.

India's proposal includes duty elimination on 60% of tariff lines in the initial phase and preferential access for nearly 90% of U.S. imports.

In return, New Delhi is seeking exemptions from U.S. President Trump's base 10% tariff and proposed additional levies of up to 26% on Indian goods.

The U.S. is India's largest trading partner, with total trade reaching $129 billion in 2024. India currently holds a $45.7 billion surplus.

The talks follow the Trump administration's recent trade breakthrough with the U.K., which involved a reduction in British tariffs on U.S. goods, though Washington kept its own base tariff intact. The agreement is seen as a model for future deals.

India and Japan are now next in line. "We'll see which one crosses the finish line first," a senior Indian official said.

India is expected to send a negotiating delegation to Washington later this month. Trade Minister Piyush Goyal may join the talks, though his participation has not been finalized, a fourth official said.

None of the officials agreed to be named due to the sensitive nature of the ongoing discussions. India's trade ministry declined to comment.

In addition to tariff relief, India is pushing for preferential access for its exports in key sectors, including gems and jewellery, apparel, textiles, leather, plastics, chemicals, shrimp, and select fruits like bananas and grapes.

"Preferential access would mean better trade terms for India compared to other U.S. trading partners," one source said. India also wants an edge in supplying high-interest products under the new framework.

However, India's push for a full tariff exemption contrasts with the U.K. deal, where Washington's 10% base tariff remained in place.

To sweeten the offer, New Delhi has proposed easing regulatory barriers on major U.S. exports, including aircraft parts, electric vehicles, luxury cars, telecom equipment, medical devices, hydrocarbons, whiskey, berries, and animal feed.

Beyond trade in goods, India is also lobbying to be treated on par with U.S. allies like the U.K., Japan, and Australia in critical technology sectors such as artificial intelligence, telecoms, biotechnology, semiconductors, and pharmaceuticals.

While Washington has expressed interest in deepening tech ties with India, restrictive U.S. regulations on technology transfer have often slowed progress.

With negotiations accelerating, the coming weeks may determine whether India can secure a comprehensive trade deal—or if compromises on both sides remain too far apart.