Tariffs Cut to 18%, $500 Billion Trade Goal: India-US Trade Framework Explained

The United States and India have finalised an interim trade agreement that reduces US tariffs on Indian goods to 18 per cent.

As part of the deal, Washington has withdrawn the additional 25 per cent duty it had earlier imposed on imports from India. Under the agreement, India will lower or eliminate tariffs on all US industrial goods and on a wide range of American agricultural and food products. These include dried distillers’ grains (DDGs), red sorghum used for animal feed, tree nuts, fresh and processed fruits, soybean oil, wine, spirits and other items.

On its part, the US will apply an 18 per cent tariff on Indian exports such as textiles and apparel, leather and footwear, plastics and rubber products, organic chemicals, home décor and handicrafts, along with select machinery.

If the interim agreement is fully concluded, the US will also remove reciprocal tariffs on several Indian products, including generic medicines, gems and diamonds, and aircraft parts. Separately, tariffs on certain aircraft and aircraft components imported from India will be scrapped altogether.

Both countries have agreed to address non-tariff barriers that complicate trade, with the aim of making cross-border business smoother. India will resolve long-standing issues affecting US medical devices, improving their access to the Indian market.

India will also remove restrictive import licensing requirements for US information and communication technology (ICT) products that delay market entry or limit quantities. In addition, New Delhi has committed to addressing non-tariff barriers impacting US food and agricultural exports.

As part of the broader trade push, India plans to purchase $500 billion worth of US goods over the next five years. These purchases will include energy products, aircraft and aircraft parts, precious metals, technology products and coking coal.

Both sides will also expand trade in advanced technology products such as graphics processing units (GPUs) used in data centres, while strengthening bilateral cooperation in critical and emerging technologies. India and the US will continue negotiations on a full Bilateral Trade Agreement (BTA) to further open markets. During these talks, the US will consider India’s request for additional reductions in tariffs on Indian goods.