Interviews | Economy | South Asia

The India-US Interim Trade Deal and New Tariffs

Insights from Pratik Dattani.

India’s Prime Minister Narendra Modi and U.S. President Donald Trump shake hands at a meeting at the White House, during Modi’s visit to Washington, D.C., Feb. 13, 2025.

The Diplomat author Mercy Kuo regularly engages subject-matter experts, policy practitioners, and strategic thinkers across the globe for their diverse insights into U.S. Asia policy. This conversation with Pratik Dattani, founder of Bridge India in London, is the 500th in “The Trans-Pacific View Insight Series.”

Explain the impact of the U.S. Supreme Court tariff ruling on the India-U.S. trade deal.

Technically there was never a trade deal. [U.S. President Donald] Trump announced a deal struck on Truth Social, but India did not respond for several days. On February 9 when the White House issued a fact sheet on the “deal,” it included “certain pulses” in the list of products where India would reduce tariffs. In India, this crossed a red line, and India’s perspective was that such changes for pulses [dried legumes] were never agreed. By February 11, the fact sheet was revised by the U.S. Administration, with the word “committed” changed to “intends.” In addition, a reference to India removing digital services taxes was removed.

What this means is there was no “deal.” It was a joint statement outlining a broad framework for an interim deal, where both countries’ readouts differed. Negotiators would have picked up thereafter.

The Supreme Court ruling means that the 18 percent [tariff on Indian imports] falls as it does for other countries. However, Section 232 tariffs (which allows the U.S. president to impose tariffs on imports deemed a threat to national security) of 50 percent on steel and aluminium and 25 percent on some auto components will remain. Somewhere around 40 percent of India’s export value is to do with smartphones, petroleum products, and medicines, which will remain exempt.

How will Washington’s new global tariff rate of 10 percent affect India’s exporters?

The lower rate is of course good news for India’s exporters, but there are a few nuances to consider.

U.S. Customs and Border Protection (CBP) said it cannot immediately comply with the Court of International Trade’s order of March 4 of starting to issue refunds to U.S. importers that have paid tariffs. The CBP has provided a clear explanation as to what their challenges are and offered a solution. We’ll know when the CBP updates the court how feasible this is. 

[Editor’s note: After this interview was conducted, the CBP provided an update to the Court of International Trade, stating that the technical upgrades needed to process the refunds are 70 percent complete.] 

For multinationals and large corporates, later refunds may not hurt. But for smaller businesses, it is a cash flow issue and provides even more business uncertainty. Buying from partners internationally like those from India will continue to be impacted until the refunds and associated interest are resolved. This will help do more business with international partners, including India.

When the initial tariffs and sanctions were put on India, Indian MP Shashi Tharoor said that 135,000 people in Prime Minister Narendra Modi’s state of Gujarat, in the city of Surat, had been laid off in the gems and jewelry business, with the seafood and manufacturing sectors also facing heavy job losses.

Analyze implications for India’s imports of Russian crude oil in the interim.

India’s imports of Russian crude oil have fallen over the past few months, perhaps because of pressure from Washington. But geopolitics is moving at an unprecedented rate. In the context of the Iran war, Trump has indicated that he will be flexible on sanctions related to purchases of Russian oil, in order to not further disrupt global markets.

This is good news for Russia, as well as for India. It’s a situation entirely of Trump’s own making, given the U.S. actions in Iran. India should use this new leverage to ensure its own interests are best served. For every $10 increase in the oil price, India’s........

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