India holds informal US talks, rules out retaliation for now

By Shruti Srivastava

India and the US are keeping informal communication channels open and New Delhi has no immediate plans to retaliate against President Donald Trump’s 50 per cent tariffs on the South Asian nation, according to an official familiar with the matter.

While talks on a bilateral trade deal have been postponed, the two countries continue to communicate on critical issues, including defense and foreign policy, a top official from the Ministry of Commerce and Industry said, asking not to be identified because the discussions are private.

The person cited virtual talks this week involving Trump officials and senior representatives from India’s foreign and defense ministries as an example of how key departments in both governments continue to engage.

Ministry of Commerce and Industry didn’t respond to a request for further information.

US tariff rate on Indian goods is highest in Asia

Commerce and Industry Minister Piyush Goyal later told reporters Friday that India is holding discussions with the US for a bilateral trade agreement.

Trump doubled tariffs on India to 50 per cent this week, the highest in Asia, penalising the country for its purchases of Russian oil. The levies will hurt labor-intensive industries such as textiles and jewelry hardest and risk eroding India’s export competitiveness against rivals like China and Vietnam. Citigroup Inc. estimates the tariffs could reduce India’s annual growth by 0.6 to 0.8 percentage points.

Tariff worries pushed India’s rupee to a record low against the dollar on Friday. The local currency was trading at 88.2388 a dollar at 2.25 pm. local time, down nearly 0.61 per cent, breaching its previous all-time low of 87.9563 in February. The rupee is Asia’s worst-performing currency this year, pressured by persistent foreign outflows from local equities.

India’s government has decried the tariffs as unfair, and has said it will keep buying Russian oil as long as its financially beneficial.

The US and India had earlier this year signed a framework agreement for a bilateral trade deal, committing to finalizing the first tranche of that pact by the fall of this year.

New Delhi will keep working with Washington toward that bilateral trade deal although no date has been set for the next round of talks, the official said. A US trade team that was scheduled to arrive in India on August 25–29 for a sixth round of trade talks had deferred its visit.

A trade deal between the two nations can’t be signed until both the reciprocal tariffs and the secondary duties over Russian oil purchases are scrapped, the official said.