Trade Talks Stall as Oil Levy Blocks US India Deal

New Delhi, Aug 29 (KNN) India’s Commerce and Industry Ministry is actively exploring relief measures to address a looming liquidity crunch triggered by steep 50% U.S. tariffs on Indian exports. 

These duties, effective from August 27, combine a 25% reciprocal tariff with an additional 25% levy targeting India’s continued oil imports from Russia  

Industry representatives warn that exporters in sectors such as textiles, chemicals, and others heavily reliant on the U.S. market could see orders slow to a trickle—raising serious financial strain, 

reported Indian express.

In response, the government is carefully shaping a relief package—not in subsidies, but structurally supportive—to help businesses sustain operations in the long term.

A key component of the proposed relief could mirror the old Merchandise Exports from India Scheme (MEIS), though revised to comply with WTO guidelines. 

One industry suggestion is that the government and exporters each absorb 15% of the tariff burden, effectively reducing the rate to 20%—aligning with global norms.

Meanwhile, the proposed U.S.–India trade deal has been put on hold until the contentious oil-related 25% levy is resolved—since any meaningful agreement cannot proceed while punitive tariffs remain in place.

Amid talks of a “wake-up call” for diversifying exports and bolstering supply chain resilience, the government stresses that it is engaging actively with its U.S. counterparts, albeit the Aug 25 trade dialogue was deferred. 

The situation underscores the urgent need to enhance export competitiveness and mitigate overdependence on singular markets.

(KNN Bureau)