US may consider lower tariffs for India over Asian peers as trade talks near finish
The United States is considering India’s demand for more favourable tariff terms than those available to competing export economies such as Bangladesh and Vietnam, with negotiations on the first tranche of the proposed Bilateral Trade Agreement (BTA) nearing completion, government officials and industry sources familiar with the discussions said.
In an interview with Network18 Editor-in-Chief Rahul Joshi on October 20, US Secretary of State Marco Rubio was asked whether India could expect better tariff rates than other countries.
“Obviously, the purpose of making a deal is to have better rates than what you have now,” Rubio said, adding that the agreement needed to ensure a sustainable trade relationship that served the economic interests of both countries.
India has put forward its views on the tariff framework, and Washington has shown an accommodative stance, a government official said, indicating movement on one of the key issues in the negotiations.
“We are negotiating the terms of the BTA with the US. We may get a favourable tariff framework, as compared to peer economies. We have put forth our views on the tariff framework, and the US has shown an accommodative stance,” the official said.
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A second government official suggested that Washington could be open to revisiting the tariff terms agreed upon earlier. Under the interim trade deal framework announced in February 2026, the US had agreed to apply an 18% reciprocal tariff rate on Indian goods covered by the arrangement.
“The US may be open to granting us a lower tariff structure than what was previously agreed,” the official said.
An industry source said the two sides were close to an understanding but stressed that India was seeking better treatment relative to competing exporters such as Bangladesh and Vietnam.
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“We are close. We want better treatment versus peers like Bangladesh, Vietnam,” the source said.
Moneycontrol emailed the Commerce Ministry seeking comments on the ongoing negotiations and the possibility of changes to the previously agreed tariff framework. A response had not been received at the time of publication.
February framework envisaged 18% tariff
The current negotiations build on a framework announced in February 2026, under which the US agreed to apply an 18% reciprocal tariff rate on Indian goods covered by the arrangement.
The proposed reduction was significant. In August 2025, the US had raised the overall tariff burden on many Indian goods to 50%, comprising a 25% reciprocal tariff and an additional 25% punitive duty linked to India’s purchases of Russian oil.
The February 6 joint statement also said Washington intended to consider India’s request for further tariff reductions during the broader BTA negotiations, leaving room for discussions on improving the terms.
However, the tariff landscape changed after the US Supreme Court invalidated the administration’s use of emergency powers to impose sweeping reciprocal tariffs in February 2026.
The Trump administration subsequently introduced a 10% baseline import tariff, changing the tariff calculations underpinning the original framework and creating fresh uncertainty over the duties applicable to Indian exports. The changes have made the final tariff structure a key issue in the ongoing negotiations.
India seeks an edge over competing export economies
For India, the tariff framework is a critical part of the negotiations, with the government keen to ensure domestic exporters are not placed at a disadvantage against competing manufacturing hubs in Asia.
Vietnam, Bangladesh, Thailand and Indonesia are key competitors, particularly in labour-intensive sectors such as textiles, apparel, footwear and other manufactured goods. Under the 2025 tariff framework, Vietnam faced a 20% tariff, while Bangladesh, Thailand and Indonesia were assigned rates of 19%.
However, the tariff landscape has since changed, with the US introducing additional tariff measures in 2026 under a separate Section 301 investigation. Under measures announced in July 2026, India, Bangladesh and Indonesia were assigned an additional 10% duty, while Vietnam and Thailand fell in the 12.5% tier.
The measures also provide for tariff-rate quotas for certain textile and apparel exports from Bangladesh and Indonesia, potentially allowing eligible shipments to avoid the additional duty, subject to specified conditions.
Commerce and Industry Minister Piyush Goyal said on October 15 that the first tranche of the India-US trade deal was in the final stages of legal drafting. He also indicated that India would operationalise the agreement once it secured a competitive advantage over peer economies.
The reference to the first tranche of the trade deal is distinct from the broader BTA negotiations, which cover a wider range of trade issues. The February framework outlined the broad contours of an interim arrangement, while the ongoing discussions are aimed at finalising the terms.
Bangladesh and Vietnam are important competitors for Indian exporters in labour-intensive sectors, including textiles and apparel, leather and footwear. Differences in import duties can affect the prices at which goods enter the US market, influencing sourcing decisions by buyers and exporters’ ability to secure orders.
“The trade deal with the US should include a lower headline tariff, preferential treatment over competitors, product-specific exemptions — particularly for labour-intensive sectors — and greater tariff certainty, that is, no sudden increases or investigations,” said Agneshwar Sen, trade policy leader at EY India.
Adrija Chatterjee is an Assistant Editor at Moneycontrol. She has been tracking and reporting on finance and trade ministries for over eight years.
Source: www.moneycontrol.com