The United States and India have reached a framework for an Interim Agreement on reciprocal and mutually beneficial trade, reaffirming their commitment to the broader U.S.–India Bilateral Trade Agreement (BTA) negotiations.
Key Features of the Interim Trade Agreement
- Tariff Liberalisation and Market Access:
- Reduction of Tariffs on U.S. Goods: India will “eliminate or reduce tariffs” on all U.S. industrial goods and a wide range of U.S. agricultural and food products.
- Key Agricultural Products Covered: These include dried distillers’ grains (DDGs), red sorghum for animal feed, tree nuts, fresh and processed fruits, soybean oil, wine and spirits, and additional product
- Reciprocal Tariff Rate of 18%: The U.S. will apply an 18 percent reciprocal tariff rate on originating Indian goods.
- Sectors Affected: This includes textile and apparel, leather and footwear, plastic and rubber, organic chemicals, home décor, artisanal products, and certain machinery.
- Tariff Removal on Key Sectors: Subject to the Interim Agreement’s conclusion, the U.S. will remove tariffs on identified Indian goods including generic pharmaceuticals, gems and diamonds, and aircraft parts
- Sectoral Concessions and Trade Facilitation
- Removal of Aircraft-Related Tariffs: The U.S. will remove tariffs on certain aircraft and aircraft parts of India imposed under Section 232-related proclamations on aluminum, steel, and copper imports.
- Preferential Tariff Quota for Auto Parts: India will receive a preferential tariff rate quota for automotive parts under Proclamation 9888.
- Non-Tariff Barrier Reduction: India has committed to addressing barriers affecting U.S. medical devices, ICT imports, and agricultural products, including licensing restrictions and standards recognition.
- Strategic Trade, Technology, and Supply Chains:
- Preferential Market Access Commitment: Both sides will provide sustained preferential market access in mutually identified priority sectors.
- Rules of Origin Framework: Both countries will establish rules of origin to ensure that trade benefits accrue primarily to U.S. and Indian producers.
- Supply Chain and Economic Security: The agreement emphasises cooperation to enhance supply chain resilience, investment screening, export controls, and responses to non-market policies of third countries.
- Energy and Strategic Purchases: India intends to purchase $500 billion worth of U.S. energy products, aircraft, technology goods, precious metals, and coking coal over five years.
- Technology Trade Expansion: Both countries will significantly increase trade in technology products, including GPUs and data-center-related goods, and expand joint technology cooperation.
| Nature of the Agreement
Unlike FTAs, the Interim Agreement focuses on selective tariff liberalisation and market access commitments rather than complete elimination of trade barriers across all sectors.
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India–US Trade Relations
- Bilateral Trade (FY25): In FY25, the bilateral trade between India and the US stood at a record US$ 132.2 billion as against US$ 119.71 billion in FY24.
- Trade Balance: In FY25, India had a trade surplus of US$ 40.82 billion with the US.
- Foreign Direct Investment (FDI): USA is the 3rd largest investor in India with cumulative foreign direct investment (FDI) inflows of US$ 70.65 billion from April 2000-March 2025.
- Major exports from India to the US:
- India’s export to the US increased from US$ 77.51 billion in FY24 to US$ 86.51 billion in FY25.
- India’s exports to the US were led by electrical machinery, precious and semi-precious stones and metals, pharmaceutical products, machinery and mechanical appliances, mineral fuels, and iron and steel articles
- Major imports by India from the US:
- Imports from the US to India rose to US$ 45.69 billion in FY25 from US$ 42.19 billion in FY24
- India’s imports from the United States in FY25 were primarily concentrated in mineral fuels and oils, precious and semi-precious stones and metals, nuclear reactors and machinery, and electrical equipment, indicating strong energy and technology linkage.
- Education and Human Capital Ties:
- The United States remains one of the most preferred destinations for Indian students pursuing higher education.
- As of September 2023, around 3.2 lakh Indian students were studying in the US, predominantly in STEM-related graduate programmes.
- Indian students contribute approximately USD 7.7 billion annually to the US economy, according to the US State Department.
7 Feb 2026
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