The United States has assured India of a comparative tariff advantage over its competitors under the interim trade agreement now being negotiated, a senior Indian government official said on Friday. The India US tariff advantage covers rival exporters such as Vietnam, Indonesia and Cambodia, but it will take effect only once Washington’s overall tariff framework is in place. The assurance answers a condition New Delhi has pressed since the two sides began work on the first tranche of a bilateral trade agreement. The final rates Indian exporters will pay are still to be set, and they will depend on the outcome of tariff investigations under way in the United States.
“We will have to see how their tariff framework unfolds. We continue to seek comparative advantage vis-a-vis our competitors, and second, in case there is any future tariff which goes beyond what is committed, then we also reserve the right to modify the concessions,” the official said. The official confirmed the assurance had been given and described the India US tariff advantage as a condition India had insisted on before signing the agreement. The extent of the advantage will depend on the outcome of the US tariff investigations, including the Section 301 probe into excess industrial capacity.
India US tariff advantage depends on US probes
The Section 301 investigation into industrial overcapacity is one of the probes that must conclude before the final tariff structure takes shape. The US Trade Representative opened the second part of that investigation in March 2026, and it covers 60 economies, including India. Until it concludes, the precise rates Indian exporters will face remain unsettled, and the India US tariff advantage cannot be fixed in numbers. Officials said the interim agreement could be finalised very soon, possibly by the end of the fiscal year, but only once the investigations conclude and the final rates emerge. Exporters are watching the probes closely, since the India US tariff advantage will only take shape once they conclude.
Indian merchandise exports to the United States rose to $59.52 billion in April to October, from $51.99 billion in the same period a year earlier, according to trade data cited in reports on the talks. The India US tariff advantage would matter most in labour-intensive goods such as textiles, where Indian exporters compete with suppliers across South and Southeast Asia. Textiles, leather goods and other labour-intensive exports employ large numbers of workers in India, and exporters in those sectors have watched the talks closely. For those exporters, a lower tariff than rivals pay would change the price of Indian goods in the US market, and the talks have put that gap at the centre of the negotiation.
India US tariff advantage and the first tranche
The India US tariff advantage will be set out in the first tranche of the deal, which will cover goods only. Services and some other matters will follow in later tranches. “Services as a subject is part of tranche two,” the official said. India has ruled out opening its dairy sector under the deal, and it will not allow imports of genetically modified products. The agreement will also carry provisions letting India modify its concessions if the United States imposes tariffs beyond what it commits to, the official said. The customs and trade facilitation chapter covers the rules for clearing goods at borders and ports, and it is one of the parts of the text where the two sides have made progress.
Talks progressing, says Commerce Secretary
Commerce Secretary Rajesh Agrawal said on Friday that the negotiations were progressing well, with both sides working to resolve the remaining differences and finalise the agreement. “India-US talks are on the right track. The teams are engaged, they have been talking virtually also,” Agrawal said. A small US team visited New Delhi in the first week of November for discussions on customs and trade facilitation. The two-day visit made substantial progress on the proposed customs and trade facilitation chapter, with several issues resolved and convergence reached on multiple aspects of the text, officials said. Agrawal did not give a date for signing, and the India US tariff advantage remains tied to the outcome of the US probes.
The two sides set out a framework for the first tranche in February, when Prime Minister Narendra Modi and US President Donald Trump agreed to work towards a trade agreement. The talks have continued since then through virtual meetings and visits. Once the investigations conclude, the two sides can set the final rates and sign the interim agreement. The India US tariff advantage will then be fixed in the text of the interim agreement.