India and US Forge Interim Trade Deal Framework: A Comprehensive Overview
The United States and India have taken a significant step toward strengthening their economic partnership by releasing a framework for an interim reciprocal trade agreement. This development, announced on Friday, aims to lower tariffs, enhance energy cooperation, and deepen economic ties as both nations work to realign global supply chains. The framework is linked to broader negotiations for a full US-India Bilateral Trade Agreement (BTA), which were launched on February 13, 2025.
Key Announcements and Objectives
The joint statement outlines a deal focused on achieving reciprocal and balanced trade while bolstering supply chain resilience. This interim agreement is designed to be implemented promptly, with both countries continuing talks toward a comprehensive bilateral trade pact.
India's Tariff Commitments
India has agreed to eliminate or reduce tariffs on all U.S. industrial goods. Additionally, duties will be cut on a wide range of U.S. agricultural and food products, including dried distillers’ grain (DDGs) and red sorghum for feed, tree nuts, fruits, soybean oil, wine, and spirits. India will also provide preferential market access in agreed sectors to facilitate smoother trade flows.
U.S. Tariff Actions
The United States will apply an 18% reciprocal tariff rate on Indian-origin goods under existing executive orders. Initially, these tariffs will cover sectors such as textiles and apparel, leather and footwear, plastics and rubber, organic chemicals, home decor, artisanal goods, and certain machinery. However, the U.S. has committed to removing reciprocal tariffs on a broad range of Indian goods, including generic pharmaceuticals, gems and diamonds, and aircraft parts, upon successful conclusion of the interim deal.
Steel, Aluminium, and Auto Parts Provisions
In a move to ease trade tensions, the U.S. will remove certain Section 232 tariffs on Indian aircraft and aircraft parts related to steel, aluminium, and copper measures. India, in turn, will receive a preferential tariff-rate quota for auto parts under U.S. national security tariff rules. Outcomes for pharmaceutical tariffs remain subject to an ongoing U.S. Section 232 investigation.
Addressing Non-Tariff Barriers
India has pledged to address long-standing non-tariff barriers affecting U.S. medical devices, ICT goods import licensing, and U.S. food and agricultural products. Within six months, India will review the acceptance of U.S. or international standards and testing rules in identified sectors. Both sides will also engage in discussions on standards and conformity assessment procedures to streamline trade.
Rules and Safeguards
To ensure that the benefits of the agreement primarily accrue to U.S. and Indian producers, both countries will establish rules of origin. Additionally, either side retains the right to modify commitments if the other party changes agreed-upon tariffs, providing a safeguard mechanism.
Digital Trade Commitments
Both nations have committed to addressing discriminatory or burdensome digital trade practices. They will work toward developing digital trade rules as part of the full BTA, aiming to foster a fair and open digital economy.
Supply Chains and Security Cooperation
The agreement includes plans to align on economic security and supply chain resilience. Cooperation is envisioned in areas such as investment reviews, export controls, and addressing non-market policies of third countries, enhancing bilateral strategic ties.
India's Purchase Commitments
India intends to purchase $500 billion worth of U.S. goods over five years. This includes energy products, aircraft and parts, precious metals, technology products, and coking coal. Both sides will also expand technology trade, focusing on items like Graphics Processing Units (GPUs) and data centre equipment.
Next Steps and Implementation
The framework is set to be implemented promptly, with both countries working to finalize the interim agreement while continuing negotiations for a full bilateral trade agreement. This step marks a pivotal moment in US-India relations, aiming to boost economic growth and stability in the global market.
