• India seeks mutual elimination of tariffs on auto parts, steel, and aluminum in bilateral trade negotiations with the US.
  • The proposal could significantly boost India’s auto component exports, which reached $6.79 billion in FY24, while opening its market to US goods.
  • Industry leaders express confidence in competing globally, though domestic sectors may face heightened competition.

A Strategic Trade Move

India has formally proposed a "zero-for-zero" tariff regime in ongoing trade talks with the US, targeting key sectors like auto parts, steel, and aluminum. The offer, aimed at securing reciprocal duty eliminations, comes as both nations seek to strengthen economic ties and address longstanding trade imbalances. India’s auto component exports to the US currently face an average 15% duty, while its imports of US-made goods in these sectors totaled $1.4 billion last fiscal year.

"We are ready to lower tariffs to zero, so the US can eliminate duties on these items too," said a government official familiar with the negotiations. "Both sides will have to agree for this." The proposal aligns with India’s broader strategy to secure favorable terms in bilateral agreements, particularly after the US imposed Section 232 tariffs on steel and aluminum imports in 2018.

Industry Reactions and Global Context

Indian manufacturers appear prepared for increased competition, with industry representatives highlighting the sector’s export readiness. The move could also counter recent US tariff hikes on automotive imports, which have disrupted global supply chains. Meanwhile, the US has been tightening trade policies, including new tariffs on passenger vehicles and critical auto parts, though India’s limited exports of finished vehicles mitigate direct exposure.

Trade experts note the zero-for-zero model mirrors past successes, such as the IT sector’s mutual tariff eliminations. However, enforcement mechanisms and value-addition norms will be critical to prevent trade circumvention. "This could set a precedent for other bilateral partnerships," an analyst observed, "but it requires careful balancing to protect domestic interests."

What’s Next?

Short-term, the deal could unlock significant export opportunities for Indian auto parts and steelmakers. Long-term, it may drive innovation but also pressure less competitive industries. Negotiations are ongoing, with both sides weighing sectoral impacts. Updates are expected ahead of the next round of talks, though neither government has disclosed a timeline.