India-US Trade Deal Unlikely to Feature ‘Zero-for-Zero’ Tariff Strategy: What It Means for Both Economies

India-US Trade Deal Unlikely to Feature ‘Zero-for-Zero’ Tariff Strategy: What It Means for Both Economies

New Delhi: The much-anticipated India-US bilateral trade agreement is expected to move forward without the inclusion of a ‘zero-for-zero’ tariff model, according to official sources. While the concept has gained attention in trade policy circles, it’s seen as unsuitable for countries like India and the United States, which are at vastly different stages of economic development.

Why ‘Zero-for-Zero’ Isn’t Practical for India-US Trade

The 'zero-for-zero' strategy—where both countries agree to eliminate tariffs on similar categories of products—has been successful among advanced economies, such as between the US and the European Union. However, trade officials argue it doesn't reflect the economic realities of emerging markets like India.

“Trade agreements don’t operate on a direct one-to-one product match. It's not about saying, ‘If they go zero on electronics, we will too,’” a senior official clarified. Instead, negotiations are heading toward a comprehensive package agreement, balancing tariff reductions, services trade, and regulatory issues.

What’s on the Table: A Comprehensive 'Package Deal'

Formal trade talks between the two countries began in March 2025, and the first phase of the agreement is expected to be finalized by September or October this year. Rather than zeroing tariffs across the board, negotiators are working on a broad framework addressing trade in goods, services, and non-tariff barriers such as licensing, quality standards, and digital regulations.

India has reportedly taken a proactive stance in the negotiations, positioning itself as a leading partner among developing nations in terms of trade deal preparedness.

Sector-Specific Priorities: What's India and the US Seeking?

United States’ Interests:

Washington is pushing for greater access to Indian markets in the following sectors:

• Industrial goods

• Electric vehicles

• Wines and spirits

• Petrochemicals

• Dairy and agricultural products such as apples, alfalfa hay, and tree nuts

India’s Demands:

India is expected to negotiate for tariff concessions in sectors critical to job creation and exports, including:

• Textiles and garments

• Gems and jewellery

• Leather goods

• Plastics and chemicals

• Shrimp and other seafood exports

• Oil seeds and horticultural produce

These areas are labour-intensive, and access to the US market can significantly bolster employment and rural income across India.

Trade Volumes and Surplus: Where Things Stand

The US has remained India’s largest trading partner over the last three financial years. In FY 2023-24:

• India exported $8.1 billion worth of drug formulations and biologicals,

• $6.5 billion in telecom instruments,

• $5.3 billion in precious and semi-precious stones, and

• $4.1 billion in petroleum products to the US.

On the import side, major American goods included:

• Crude oil ($4.5 billion)

• Petroleum products ($3.6 billion)

• Coal and coke ($3.4 billion)

• Aircraft and spacecraft components ($1.3 billion)

India recorded a trade surplus of $35.32 billion with the US in FY24, up from $27.7 billion in FY23, underscoring the significance of the relationship.

Looking Ahead: Doubling Bilateral Trade to $500 Billion

India and the US have set an ambitious goal of doubling bilateral trade to $500 billion by 2030, up from the current level of approximately $191 billion. Achieving this requires carefully calibrated agreements that address market access, supply chain diversification, and investment in emerging sectors like clean energy and digital trade.

Final Thoughts

While the zero-for-zero idea may work in theory for peer economies, India’s unique developmental needs call for a more flexible, sector-specific approach. The ongoing negotiations between India and the US aim to find common ground, allowing both nations to benefit while respecting their respective economic trajectories.

Stay tuned as both sides advance into sector-level discussions in the coming weeks, which will shape the roadmap for one of the world’s most significant bilateral trade partnerships.