NEW DELHI: India and the United States have unveiled the contours of an Interim Trade Agreement that will see India slash tariffs on all US industrial goods and a wide range of farm products, while Washington applies a reciprocal 18% tariff on Indian goods but commits to removing those duties on key sectors such as generic pharmaceuticals, gems and diamonds, and aircraft parts once the pact is concluded. The framework also rolls back Section 232-era tariffs on certain Indian aircraft components, grants India a preferential quota for auto parts, addresses long-standing non-tariff barriers in medical devices, ICT goods and agriculture, and sets rules of origin to prevent third-country routing — all while paving the way for a comprehensive Bilateral Trade Agreement (BTA).
The joint statement follows the launch of BTA negotiations by US President Donald Trump and Prime Minister Narendra Modi on February 13, 2025. Both sides described the interim pact as a “historic milestone” aimed at ensuring reciprocal and balanced trade while strengthening supply chains and economic security alignment.
Prime Minister Narendra Modi welcomed the development, saying: “Great news for India and USA! We have agreed on a framework for an Interim Trade Agreement between our two great nations. I thank President Trump for his personal commitment to robust ties between our countries.”
He added that the framework “reflects the growing depth, trust and dynamism of our partnership. It strengthens ‘Make in India’ by opening new opportunities for India’s hardworking farmers, entrepreneurs, MSMEs, StartUp innovators, fishermen and more. It will generate large-scale employment for women and youngsters.”
Modi said the agreement would deepen investment and technology partnerships and help build resilient supply chains. “As India moves forward towards building a Viksit Bharat, we remain committed to building global partnerships that are future-oriented, empower our people and contribute to shared prosperity,” he said.
Commerce and Industry Minister Piyush Goyal said the interim framework would deliver early outcomes and build momentum for the full BTA. “This agreement addresses long-pending market access issues, reduces friction for businesses, and opens new avenues for Indian exporters, farmers and technology firms in the US market,” he said.
Tariff realignment
India will eliminate or reduce tariffs on US industrial goods and a broad basket of agricultural and food products, including DDGs, red sorghum for feed, tree nuts, fruits, soybean oil, wine and spirits.
The US will levy an 18% reciprocal tariff on Indian goods such as textiles, leather, plastics, rubber, organic chemicals, home décor and certain machinery. But it signalled that once the interim agreement is operational, tariffs will be lifted for sectors identified for “aligned partners,” notably generics, gems and diamonds, and aircraft parts.
Section 232 relief and auto quotas
Washington will remove tariffs imposed under national security proclamations relating to steel, aluminium and copper for certain Indian aircraft and aircraft parts. India will receive a preferential tariff rate quota for automotive parts subject to US Section 232 tariffs.
Outcomes for India’s generic pharmaceutical exports will depend on the ongoing US Section 232 investigation into pharma and ingredients.
Non-tariff barriers and standards
India agreed to address US concerns on medical device market access, dismantle restrictive import licensing on ICT goods, and within six months determine whether US or international standards and testing norms can be accepted for identified sectors. Barriers affecting US farm exports will also be addressed.
Both sides will engage on standards and conformity assessment procedures to ease compliance.
Rules of origin and safeguard clause
The pact will include strict rules of origin to ensure benefits accrue primarily to India and the US. A safeguard clause allows either country to recalibrate commitments if the other alters agreed tariffs.
Digital trade, tech and supply chains
The two countries committed to address barriers to digital trade and work towards ambitious digital trade rules under the BTA. They also pledged cooperation on export controls, investment reviews and countering non-market policies of third countries, alongside expanded trade in GPUs and other data-centre hardware.
$500 billion purchase intent
India indicated its intent to purchase $500 billion worth of US energy, aircraft and parts, precious metals, technology products and coking coal over five years.
Road to BTA
The interim framework is to be implemented quickly even as negotiations continue towards the comprehensive BTA. The US acknowledged India’s request for further tariff reductions on Indian goods as talks progress, with officials describing the interim pact as an “early harvest” delivering immediate relief while more complex market access issues are negotiated.