Tariff Stalemate May End Soon: CEA Foresees India-US Ties

V. Anantha Nageswaran, India’s Chief Economic Adviser (CEA), struck a confident tone on Thursday, hinting that the long-standing tariff tensions between India and United States could be nearing a breakthrough. Speaking at an industry forum in Kolkata, Nageswaran said he expects an India-US tariff resolution within the next two months, a development that could mark a pivotal reset in bilateral trade ties.

“Beneath the surface, lots of conversations are going on between the two governments… Although I don’t have a crystal ball or any insider information, my personal confidence is that in the next couple of months, if not earlier, we will see a resolution, at least to the extra tariff of 25%,” Nageswaran noted.

He added that Washington may soon roll back the additional 25% duty imposed on New Delhi for purchasing Russian crude. “It may also be the case that the reciprocal tariff of 25% may also come down to levels we were anticipating earlier—somewhere between 10% and 15%. If that comes, that will be an even bigger occasion for celebration,” he said.

Trade Tensions Under Scrutiny

Trade ties have entered a sensitive phase after former US President Donald Trump had slapped steep 50% tariffs on Indian goods—split between a 25% reciprocal tariff and another 25% linked to Russian oil imports. While these measures rattled Indian exporters, both governments have kept diplomatic backchannels busy in pursuit of a resolution.

The US remains India’s largest trading partner and one of the few major economies with which New Delhi enjoys a healthy trade surplus. That surplus widened 16.6% in FY25 to $41.18 billion, driven by an 11.6% jump in exports to $86.51 billion and a 7.4% rise in imports to $45.33 billion. In contrast, India’s overall goods trade deficit ballooned to $282.8 billion during the same period.

Officials on both sides have agreed to fast-track talks for an early, mutually beneficial trade agreement. Nageswaran said a thaw in tariff tensions would reverberate far beyond just numbers, boosting capital formation, corporate sentiment, and business confidence.

“The sentiment effect and the potential for growth that these numbers indicate are not insignificant,” he said.

Domestic Economy Showing Resilience

Nageswaran also highlighted India’s robust domestic momentum. The economy clocked 7.8% growth in the first quarter of FY26, powered by strong manufacturing and services output. With healthy sowing patterns, good reservoir levels, and timely monsoon rains, agriculture is expected to add further momentum in the coming quarters.

Early indicators from July and August suggest that second-quarter growth could again exceed 7%, he noted.

Another bright spot, Nageswaran said, is the government’s continued push on public investment. Capital expenditure has surged over threefold—from ₹3.1 trillion in 2019 to over ₹10 trillion now—signaling long-term policy commitment. “Even if these numbers stabilize in the next few years, it is not a walk-back on the government’s commitment. We need to assimilate and digest what has already been done,” he observed.

Structural Reforms and Investment Outlook

On structural reforms, the CEA emphasized deregulation and improving ease of doing business as essential priorities. He said coordinated efforts at the central and state levels are simplifying compliance and improving trust between businesses and the government.

While foreign direct investment inflows have seen bouts of profit repatriation, Nageswaran said this reflects long-term investors booking profits, not waning confidence. “Fresh money is still coming in,” he said, pointing out that $25 billion in new investments poured in during the June quarter alone.

Also Read : Reena Roy: The Emmy-Nominated ABC News Correspondent