United States–India Interim Trade Agreement

Source: PIB

Subject: Economy/International Relations

Context: India and the United States have announced a framework for a United States–India Interim Trade Agreement, marking a major breakthrough in reciprocal market access and tariff realignments.

About United States–India Interim Trade Agreement:

What it is?

• The U.S.–India Interim Trade Agreement is a temporary, outcome-oriented trade framework designed to deliver early harvest commitments on tariffs, market access, and non-tariff barriers, while negotiations continue for a full-fledged Bilateral Trade Agreement (BTA).

• To establish reciprocal and balanced trade based on mutual interests.

• To expand market access for goods, agriculture, technology, and energy.

• To enhance supply-chain resilience and economic security.

• To pave the way for a comprehensive BTA with durable trade rules.

Key Features of the Interim Trade Agreement:

• Tariff Liberalisation by India: India will eliminate or reduce tariffs on U.S. industrial goods and a wide range of agricultural products, including ethanol by-products (DDGs), oilseeds, fruits, nuts, wine, and spirits.

• Reciprocal Tariff Framework by the U.S.: The U.S. will apply a reciprocal tariff rate of 18% initially on select Indian exports, with a pathway to tariff removal on priority sectors such as generic pharmaceuticals, gems & jewellery, and aircraft parts upon successful conclusion.

• Relief from National Security Tariffs: Removal of U.S. Section 232 tariffs on Indian aircraft parts, steel, aluminium-linked items, and preferential tariff-rate quotas for automotive components.

• Rules of Origin: Jointly agreed rules to ensure that trade benefits accrue primarily to India and the U.S., preventing third-country circumvention.

• Non-Tariff Barrier (NTB) Reforms: India commits to easing long-standing barriers in medical devices, ICT goods, and agricultural imports, including import licensing and standards recognition.

• Standards & Conformity Cooperation: Both sides will align technical regulations, testing, and conformity assessment procedures to improve ease of doing business.

• Digital Trade Commitments: Agreement to address discriminatory digital trade practices and establish a pathway for ambitious digital trade rules under the BTA.

• Supply Chain & Economic Security Alignment: Cooperation on export controls, investment screening, and countering non-market policies of third countries.

• Strategic Purchases & Technology Trade: India plans to purchase USD 500 billion worth of U.S. energy, aircraft, critical minerals, and technology (including GPUs for data centres) over five years.