India-US trade deal: India wants Donald Trump administration to offer tariff rate lower than Indonesia; eyes competitive advantage

India-US trade deal: US President Donald Trump has said that America is eyeing market access into India, on the same lines as the one Indonesia has granted it as part of the trade deal. However, India is looking to seal a trade deal with the US that entails tariff rates that are lower than the one imposed on Indonesia.

On Tuesday, Trump announced an agreement with Indonesia that reduces the tariff rate from 32% - threatened in the tariff letter - to 19%.



“We made a deal with Indonesia. I spoke to their really great president...and we made the deal. We have full access to Indonesia, everything. As you know, Indonesia is very strong on copper, but we have full access to everything. We will pay no tariffs. They are giving us access into Indonesia, which we never had. That's probably the biggest part of the deal...India is basically working along that same line,” Trump told reporters.

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“We're going to have access into India. You have to understand, we had no access to any of these countries. Our people couldn't go in and now we're getting access because of what we're doing with the tariffs…,” he added.

India-US Trade Deal: What Will Be The Tariff Rate?

• According to a Bloomberg report, Indian officials are working to negotiate a trade agreement with the Trump administration, aiming to secure a more favourable tariff rate than Indonesia's deal before the August 1, 2025 deadline.
• India is looking at tariff rates more advantageous than both Indonesia's agreement and Vietnam's proposed 20% tariff, officials were quoted as saying.
• Currently, a negotiating team is in Washington for another round of trade deal talks, with both nations working towards finalizing a tariff rate below 20%.
• Indian officials believe their position warrants preferential treatment compared to regional counterparts.
• They maintain that the US distinguishes India from Vietnam and other Southeast Asian countries, which are often viewed as transhipment hubs.
• Current negotiations suggest India might receive more beneficial tariff terms than these nations, a source familiar with the matter told Bloomberg.

Soumya Kanti Ghosh, who serves as the chief economist at State Bank of India, and is part of the prime minister's Economic Advisory Council, indicated that negotiations aim to reduce the tariff to under 10%. "And in the bargain, the US will expect significant concessions for its goods when they decide to enter India," he said.

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India has maintained its stance against opening up its agricultural and dairy sectors, though it might offer concessions in other industrial segments, Ghosh was quoted as saying.

The Indian government has put forward a proposal to eliminate tariffs on US industrial products, provided the US reciprocates similarly.

Additionally, New Delhi has extended improved market access for select US agricultural products and has suggested increasing its purchases of Boeing Co. aircraft.

Trump’s Trade Deals

Trump has secured trade agreements with the UK and Vietnam, alongside a truce with China, and now Indonesia. The agreement with Jakarta includes commitments to purchase US energy worth $15 billion, agricultural products valued at $4.5 billion, and Boeing aircraft. The US President has sent out tariff letters to over 20 countries warning of new reciprocal tariff rates effective August 1, 2025.

According to Brian Tan, an economist at Barclays Plc in Singapore, tariff rates are settling between 15%-20%, aligning with Trump's preferred range.

He suggests that the tariff notifications to trading partners serve as a strategic approach to encourage improved offers for the US, enabling the administration to achieve more advantageous agreements.

The Star reported that Malaysia's trade minister is awaiting details of the Indonesia agreement whilst continuing negotiations with the US regarding their tariffs.

Tengku Zafrul, minister of investment, trade and industry, emphasised in the newspaper: "Most importantly, we must ensure that this is a negotiation beneficial to both countries. It must be win-win."

Also Read | India-US trade deal: Will Donald Trump go for less than 20% tariff rate for India? Top 10 developments to track

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