Penal US tariff likely to be withdrawn after November 30, says CEA

Chief Economic Adviser (CEA) V. Anantha Nageswaran on Thursday expressed confidence that the penal tariff imposed on Indian imports by the United States may be withdrawn after November 30, raising hopes of an easing in trade restrictions amid ongoing discussions between the two governments.Speaking at an event organised by the Merchants' Chamber of Commerce & Industry in Kolkata, Nageswaran said, “Yes, the original reciprocal tariff of 25 per cent plus the penal tariff of 25 per cent both were not anticipated. I still believe that geopolitical circumstances may have led to the second 25 per cent tariff, but considering recent developments in the last couple of weeks, I do believe the penal tariff will not be there after November 30.”
He added that he was optimistic about a resolution in the next two months covering both penal and reciprocal tariffs. “I do believe there will be a resolution in the next couple of months on the penal tariff and hopefully on the reciprocal tariffs,” he said, while pointing to the “active conversations” between India and the US on the matter.Highlighting India’s resilience in trade, the CEA noted that the country’s annual exports have reached USD 850 billion and are on track to touch USD 1 trillion, equivalent to nearly 25 per cent of GDP. “This indicates a healthy, open economy,” he said.
The tariff dispute traces back to US President Donald Trump’s decision to invoke the International Emergency Economic Powers Act (IEEPA), a 1977 law allowing sanctions during foreign emergencies, to impose tariffs on dozens of countries. India was hit with a 25 per cent reciprocal tariff, which was later doubled to 50 per cent.The 50 per cent duties on Indian goods came into effect on Wednesday and apply to all products either entering for consumption in the US or withdrawn from bonded warehouses. While the higher tariffs broadly cover Indian imports, exemptions have been granted to certain categories, including iron and steel products, aluminium and its derivatives, passenger vehicles such as sedans, SUVs, and minivans, as well as their spare parts. Semi-finished copper products and some intensive copper derivatives are also excluded.
On domestic reforms, Nageswaran also emphasised the growth potential of the Goods and Services Tax (GST). “The impact will be significant for GDP growth. When you have higher purchasing power in the hands of the people, when the rates come down, it leads to a circle of demand, production, and an increase in capacity, which contributes to income growth. The impact will be significant for GDP growth,” he said.

#WATCH | On GST reforms, V. Anantha Nageswaran, Chief Economic Adviser, says, "The impact will be significant for GDP growth...When you have higher purchasing power in the hands of the people, when the rates come down, it leads to a circle of demand, production, and an increase… pic.twitter.com/8c2Z2nqThq

— ANI (@ANI) September 18, 2025

According to the Global Trade Research Initiative (GTRI), around 30.2 per cent of India’s exports to the US—valued at USD 27.6 billion—will remain duty-free despite the imposition of the higher tariffs.The expectation of tariff relief, combined with ongoing bilateral talks, has reinforced optimism among exporters and policymakers that trade frictions could ease before the year-end.

(Business Correspondent)