India Seeks Lower Tariff Than Indonesia in Race to Clinch Deal

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(Bloomberg) — Indian officials are hoping to secure a trade deal with US President Donald Trump at a lower tariff rate than he’d agreed with Indonesia as New Delhi races to meet an Aug. 1 deadline.

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Trump said Tuesday the US will impose a tariff rate of 19% on imports from Indonesia, down from a threatened 32%, and will be able to ship American goods to the country tariff-free. The US president later told reporters that the India deal would be “along that same line” and “we’re going to have access into India.”

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India is seeking more favorable rates than Indonesia and the 20% tariff Trump has said he’ll impose on Vietnam, officials in New Delhi said, asking not to be identified because the discussions are private. The US and India are working toward a deal that would reduce proposed tariffs to below 20%, Bloomberg News previously reported, with a negotiating team currently in Washington to advance the talks.

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New Delhi is hoping for a tariff that would give it a competitive advantage against its peers in the region, officials said. India believes the US doesn’t view it as a transshipment hub like Vietnam and other Southeast Asian nations, and negotiations so far suggest India’s tariff rate would be better than those countries, one of the people said. 

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India’s Ministry of Commerce and Industry didn’t immediately respond to an email seeking further comment.

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GLOBAL INSIGHT: Delhi’s Trade Math in Talks with Trump

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Soumya Kanti Ghosh, chief economist of State Bank of India, the largest government-owned lender, and a member of the prime minister’s Economic Advisory Council, said the negotiating team would be hoping to bring the tariff down to below 10%. “And in the bargain, the US will expect significant concessions for its goods when they decide to enter India,” he said. 

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While India is unwilling to open up the agricultural and dairy sectors, it may give concessions in non-agricultural sectors, he said. 

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India has already proposed to reduce tariffs on American industrial goods to zero if the US does the same. New Delhi has also offered greater market access to some American farm products, and has also raised the possibility of buying more Boeing Co. planes.

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Aside from Indonesia, Trump has also announced trade deals with the UK and Vietnam, and a truce with China. Trump said Jakarta had agreed to purchase $15 billion in US energy and $4.5 billion worth of agricultural products along with Boeing planes. 

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The latest development shows that tariff rates are gravitating toward 15%-20%, a range that Trump himself has indicated as his preferred level, said Brian Tan, Barclays Plc’s economist in Singapore. The tariff letters sent to trading partners so far are likely a negotiating tactic to bring governments back to the table with better offers for the US, he said, “allowing the Trump administration to secure superior ‘deals’.”

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Malaysia’s trade minister said he’s waiting to see the details of the Indonesia agreement and the country is still in negotiations with the US on its own tariffs, The Star reported.  

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“Most importantly, we must ensure that this is a negotiation beneficial to both countries,” Tengku Zafrul, minister of investment, trade and industry, was quoted by the newspaper as saying. “It must be win-win.”

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—With assistance from Anisah Shukry and Claire Jiao.

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