India and the US agreed on an interim trade deal reducing tariffs on various goods to boost trade. India will buy $500B in US products over 5 years. The pact covers tech trade, supply chain security, and aims for a full Bilateral Trade Agreement
India-US Trade Deal: India and the United States on Saturday, Feb. 7, announced that they have reached a framework for an interim trade agreement under which both sides will reduce import duties on a number of goods to boost two-way trade. According to a joint statement issued by both sides, India has expressed its intention to purchase $500 billion of US energy products, aircraft and aircraft parts, precious metals, technology products and coking coal over the next five years.
Further, through an executive order, US President Donald Trump has removed the 25% tariffs, or additional import duty, that it imposed on India in August last year for purchasing Russian oil, citing that the country has undertaken "significant steps". Here are the top 10 key highlights of the interim trade deal agreement signed between the two nations:
India-US Interim Trade Deal: Top 10 Highlights
1. Tariff Reductions, Market Access
India's Concessions: India commits to eliminate or reduce tariffs on all US industrial goods: A wide range of US food and agricultural products (specifically dried distillers grains, red sorghum, tree nuts, fruits, soybean oil, wine, and spirits).
US Concessions: US generally applies a reciprocal tariff rate of 18% on Indian goods. However, under this agreement, the US agrees to remove this reciprocal tariff on specific Indian exports, including: Generic pharmaceuticals, gems, diamonds and aircraft parts.
Metals and Aviation: US will also remove tariffs on Indian aircraft and parts previously imposed under national security proclamations (Aluminum, Steel, and Copper).
2. Financial Commitment
The $500 Billion Pledge: A standout figure in the document is India's intention to purchase $500 billion worth of US goods over the next five years.
Target Sectors: This purchasing commitment focuses on energy products, aircraft, precious metals, technology products, and coking coal.
3. Technology and Supply Chain Security
High-Tech Trade: Both nations agree to significantly increase trade in technology products, specifically mentioning Graphics Processing Units (GPUs) and data center goods.
Supply Chain Resilience: The agreement emphasizes strengthening economic security and addressing "non-market policies of third parties" (often a diplomatic reference to countering influence from competitors like China).
Export Controls: Cooperation on inbound and outbound investment reviews and export controls.
4. Eliminating Non-Tariff Barriers (NTBs)
Medical and ICT Goods: India agrees to address long-standing barriers in the US medical device trade and eliminate restrictive import licensing on US Information and Communication Technology (ICT) goods.
Standards Alignment: India will determine within six months if US/international standards are acceptable for US exports entering India, aiming to simplify testing requirements.
5. Date of effective tariff rate: The White House announced in a statement that the new tariff rate of 18% for India as agreed in the interim trade deal pact will be effectivbe immediately from Saturday, Feb. 7, 2026.
6. $30 trillion market open for Indian exporters: Commerce and Industry Minister Piyush Goyal said the interim pact will open a $30 trillion market for Indian exporters, especially MSMEs, farmers and fishermen, as the US duties on Indian goods will come down to 18% from 50% earlier. The reduction in tariffs will help boost exports of India's labour-intensive sectors such as textiles and apparel, leather and footwear, plastic and rubber, organic chemicals, home decor, artisanal products and certain machinery.
7.Exemptions under Sector 232: India will also get exemptions under section 232 on aircraft parts, tariff rate quota on auto parts and negotiated outcomes on generic pharmaceuticals, leading to tangible export gains in these sectors. "At the same time, the Agreement reflects India's commitment to safeguarding farmers' interests and sustaining rural livelihoods by completely protecting sensitive agricultural and dairy products, including maize, wheat, rice, soya, poultry, milk, cheese, ethanol (fuel), tobacco, certain vegetables, meat, etc," said Commerce Minister Piyush Goyal.
8. Formal deal to be announced in March: In February last year, the two nations entered into negotiations for the first phase of the biltareral trade agreement (BTA). The interim trade framework will now be converted into a legal pact, which is expected to be signed by mid-March, following which India will start cutting down the duties on specified American goods.
9. India opens agri access to US: The United States Trade Representative has (USTR) said that President Trump is expanding American farmers and producers' access to one of the largest economies in the world under a trade deal with India. "Trump is expanding American farmers and producers' access to one of the largest economies in the world, with India committing to eliminate or lower tariffs for all US industrial goods and a wide array of agricultural products; address long-standing non-tariff barriers to trade; buy more American goods and services and purchase over $500 billion of US products," the USTR said.
10. Future Roadmap for BTA
Digital Trade: Both sides commit to setting a pathway for robust digital trade rules within the broader trade agreement.
Flexibility: The agreement includes a clause allowing one country to modify commitments if the other changes its agreed-upon tariffs.
Goal: The ultimate objective is to conclude a comprehensive, mutually beneficial trade deal agreement.
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