India and US Finalise Framework for Interim Trade Deal, Slash Import Duties to Boost Bilateral Trade

Tariff Cuts to Ease Market Access for Indian Exporters​

India and the United States have announced a framework for an interim trade agreement aimed at significantly reducing import duties on a wide range of goods, marking a major step toward strengthening bilateral trade ties. The framework is designed to provide immediate relief to exporters and set the stage for a comprehensive Bilateral Trade Agreement in the future.

Under the arrangement, the United States will reduce import duties on Indian goods to 18 percent from the earlier level of 50 percent. This follows the withdrawal of the additional 25 percent tariffs imposed last year, after India committed to stopping direct or indirect imports of Russian oil.

Interim Pact Opens USD 30 Trillion Market for India​

The interim trade framework is expected to open access to a USD 30 trillion US market for Indian exporters. Sectors likely to benefit include MSMEs, farmers and fishermen, with labour-intensive industries such as textiles and apparel, leather and footwear, plastic and rubber products, organic chemicals, home decor, artisanal goods and certain machinery expected to see a boost in exports.

A joint statement said both sides will promptly implement the framework and work toward finalising the interim agreement, with the broader objective of concluding a mutually beneficial Bilateral Trade Agreement.

India to Cut Duties on US Industrial and Farm Goods​

As part of the framework, India will eliminate or reduce tariffs on all US industrial goods and a broad range of American agricultural and food products. These include dried distillers’ grains, red sorghum for animal feed, tree nuts, fresh and processed fruits, soybean oil, wine and spirits, along with additional products.

The framework also reaffirms the commitment to the Bilateral Trade Agreement negotiations launched by Donald Trump and Narendra Modi on February 13, 2025, which are expected to include further market access commitments and support resilient supply chains.

Zero Tariffs Planned for Key Sectors Post Interim Deal​

Subject to the successful conclusion of the interim agreement, tariffs are expected to be reduced to zero on a wide range of goods, including generic pharmaceuticals, gems and diamonds, and aircraft parts. The framework also removes tariffs on certain aircraft and aircraft components from India.

In addition, India will receive a preferential tariff rate quota for automotive parts, consistent with US national security requirements.

Focus on Non-Tariff Barriers and Medical Devices​

Both countries have agreed to address non-tariff barriers affecting bilateral trade, which stood at over USD 191 billion. India has committed to resolving long-standing issues related to US medical devices, food and agricultural products, and to eliminate restrictive import licensing procedures affecting American information and communication technology goods.

The two sides will also engage in discussions on standards and conformity assessment procedures in mutually agreed sectors to improve ease of compliance with technical regulations.

Energy, Technology and Defence Cooperation to Expand​

India has expressed its intent to purchase USD 500 billion worth of US energy products, aircraft and aircraft parts, precious metals, technology products and coking coal over the next five years. The framework also outlines plans to significantly increase trade in technology products, including graphics processing units and other data centre-related equipment, alongside expanded joint technology cooperation.

Separately, India has committed to a framework to expand defence cooperation with the United States over the next decade.

Duty Relief Effective February 7, Agreement Signing Expected by March​

Following an executive order issued in Washington, the additional 25 percent duties on Indian goods have been removed for imports entering the US from February 7. The interim framework is expected to be converted into a legal agreement and signed by mid-March, after which duty concessions will formally take effect.

Bilateral Trade Remains Strong​

During 2021 to 2025, the United States was India’s largest trading partner in goods. In 2024 to 2025, bilateral trade reached USD 186 billion, with India exporting USD 86.5 billion and importing USD 45.3 billion worth of goods. India recorded a trade surplus of USD 41 billion with the US during the year.

Commenting on the development, Commerce and Industry Minister Piyush Goyal said the interim trade pact would open vast opportunities for Indian exporters, particularly MSMEs, farmers and fishermen, strengthening India’s position in global trade.