India, US unveil interim trade framework, inch closer to broad pact

The United States and India today (7 February) released a joint statement outlining a framework for an interim bilateral trade agreement under which New Delhi will eliminate or reduce tariffs on all US industrial goods and a wide range of US food and agricultural products, while Washington will apply a reciprocal tariff rate of 18% on Indian goods, including textiles.

The joint statement, released simultaneously in New Delhi and Washington, said India intends to purchase $500 billion worth of US energy products, aircraft and aircraft parts, precious metals, technology products, and coking coal over the next five years.

The announcement follows nearly a year of trade tensions between the two countries, sparked by the Trump administration's imposition of tariffs on Indian goods, which were later doubled to 50% as a penalty over India's purchase of Russian oil.

Earlier today, President Donald Trump also signed an executive order lifting the punitive additional 25% tariff imposed on India over its Russian oil imports.

The joint statement said, "India and the United States will significantly increase trade in technology products, including Graphics Processing Units (GPUs) and other goods used in data centres, and expand joint technology cooperation."

"Today's framework reaffirms the countries' commitment to the broader US-India Bilateral Trade Agreement (BTA) negotiations, launched by President Donald Trump and Prime Minister Narendra Modi on 13 February 2025, which will include additional market access commitments and support more resilient supply chains," it added.

"The interim agreement between the United States and India will represent a historic milestone in our countries' partnership, demonstrating a common commitment to reciprocal and balanced trade based on mutual interests and concrete outcomes," the statement said.

According to the joint statement, key terms of the interim trade agreement will include India eliminating or reducing tariffs on all US industrial goods and a wide range of US food and agricultural products, including dried distillers' grains, red sorghum for animal feed, tree nuts, fresh and processed fruit, soybean oil, wine and spirits, and additional products.

The United States will apply a reciprocal tariff rate of 18% under an executive order on originating goods from India, including textiles and apparel, leather and footwear, plastic and rubber products, organic chemicals, home décor, artisanal products, and certain machinery.

The United States will also remove tariffs on certain Indian aircraft and aircraft parts. Similarly, India will receive a preferential tariff-rate quota for automotive parts.

The two countries commit to providing each other with preferential market access in sectors of mutual interest on a sustained basis.

They will also establish rules of origin to ensure that the benefits of the bilateral trade agreement accrue predominantly to the United States and India.

According to the statement, both sides will address non-tariff barriers affecting bilateral trade. "India agrees to address long-standing barriers to trade in US medical devices and to eliminate restrictive import licensing procedures that delay market access for, or impose quantitative restrictions on, US Information and Communication Technology (ICT) goods," it said.

India will also determine, within six months of the agreement's entry into force and with a view towards a positive outcome, whether US-developed or international standards, including testing requirements, are acceptable for US exports entering the Indian market in identified sectors.

India further agreed to address long-standing non-tariff barriers affecting US food and agricultural products.

To enhance ease of compliance with applicable technical regulations, the United States and India intend to discuss their respective standards and conformity assessment procedures for mutually agreed sectors.

In the event of changes to agreed-upon tariffs by either country, both sides agree that the other may modify its commitments accordingly.

The United States and India will work towards expanding market access opportunities through continued negotiations under the bilateral trade agreement.

The United States affirmed that it intends to take into consideration India's request to continue working toward lowering tariffs on Indian goods.

Both countries also agreed to strengthen economic security alignment to enhance supply chain resilience and innovation through complementary actions to address non-market policies of third parties, as well as cooperation on inbound and outbound investment reviews and export controls.

The two sides committed to addressing discriminatory or burdensome practices and other barriers to digital trade, and to setting a clear pathway toward robust, ambitious, and mutually beneficial digital trade rules as part of the bilateral trade agreement.

Indian Prime Minister Narendra Modi welcomed the framework for the interim trade agreement, saying it reflects the growing depth, trust, and dynamism of the bilateral partnership.

Modi said the agreement would strengthen the Make in India initiative by opening new opportunities for farmers, entrepreneurs, MSMEs, startup innovators, and fishermen, while generating large-scale employment for women and youth.

He added that the framework would deepen investment and technology partnerships, strengthen resilient and trusted supply chains, and contribute to global growth.

The prime minister reiterated India's commitment to future-oriented global partnerships that empower people and promote shared prosperity, and thanked President Trump "for his personal commitment to strengthening ties between the two countries."

"This 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.

"India and the United States share a commitment to promoting innovation, and this framework will further deepen investment and technology partnerships between us," he added in a post on X.

Modi said the framework for the bilateral trade deal would also strengthen resilient and trusted supply chains and contribute to global growth.