The United States and India have proudly declared that they have finalized a framework for an Interim Agreement aimed at fostering reciprocal and mutually advantageous trade relations—let’s call it the “Interim Agreement.” This framework underscores both nations’ dedication to advancing the broader U.S.-India Bilateral Trade Agreement (BTA) negotiations, which were kickstarted by President Donald J. Trump and Prime Minister Narendra Modi on February 13, 2025. The BTA is projected to encompass greater market access commitments and bolster supply chain resilience. This Interim Agreement is poised to mark a significant turning point in the partnership between the two countries, reflecting a shared commitment to balanced trade based on mutual interests and tangible results.
Key elements of the Interim Agreement between the United States and India include:
- India will reduce or eliminate tariffs on a variety of U.S. industrial goods as well as a broad spectrum of American food and agricultural products. This includes dried distillers’ grains (DDGs), red sorghum for animal feed, tree nuts, fresh and processed fruits, soybean oil, wine, and spirits, among others.
- The United States, in return, will impose a reciprocal tariff rate of 18 percent under Executive Order 14257 (Regulating Imports With a Reciprocal Tariff to Rectify Trade Practices That Contribute to Large and Persistent Annual United States Goods Trade Deficits) on certain goods imported from India. This encompasses textiles, apparel, leather, footwear, organic chemicals, home décor, artisanal products, and specific machinery. However, should the Interim Agreement be successfully finalized, these tariffs could be lifted on a range of goods listed in the Potential Tariff Adjustments for Aligned Partners Annex of Executive Order 14346, which includes generic pharmaceuticals, gems, diamonds, and aircraft parts.
- The U.S. will also revoke tariffs on select Indian aircraft and aircraft parts that were initially imposed under national security claims from Proclamation 9704 (Adjusting Imports of Aluminum) and Proclamation 9705 (Adjusting Imports of Steel). Similarly, India will be granted a preferential tariff rate quota for automotive parts that are currently subject to tariffs due to national security concerns outlined in Proclamation 9888 (Adjusting Imports of Automobiles). Additionally, contingent on the findings of a U.S. Section 232 investigation concerning pharmaceuticals, India will negotiate favorable terms regarding generic pharmaceuticals and their ingredients.
- Both nations commit to providing each other with preferential market access in sectors of mutual interest on a consistent basis.
- Rules of origin will be established to ensure that the benefits of this Agreement primarily favor both the United States and India.
- The Agreement aims to tackle non-tariff barriers hindering bilateral trade. India has agreed to address persistent barriers affecting U.S. medical devices, eliminate restrictive import licensing procedures that delay access for U.S. Information and Communication Technology (ICT) goods, and evaluate whether U.S.-developed or international standards are acceptable for U.S. exports entering the Indian market within six months of the Agreement’s enactment. Furthermore, India will work on long-standing non-tariff barriers affecting U.S. food and agricultural products.
- To enhance compliance with technical regulations, the U.S. and India plan to discuss their respective standards and conformity assessment procedures for mutually agreed sectors.
- Should either country amend its agreed tariffs, both nations will allow modifications to their commitments.
- The U.S. and India aspire to broaden market access opportunities through ongoing negotiations of the BTA. The U.S. also acknowledges India’s appeal for reduced tariffs on Indian goods during these negotiations.
- Both countries are committed to strengthening economic security alignment to enhance supply chain resilience and innovation, particularly through cooperative actions addressing non-market policies from third parties and collaboration on investment reviews and export controls.
- India is poised to purchase $500 billion worth of U.S. energy products, aircraft, precious metals, technology products, and coking coal over the next five years. Furthermore, both nations are set to significantly increase trade in technology goods, particularly Graphics Processing Units (GPUs) and other products essential for data centers, while also expanding joint technology cooperation.
- The U.S. and India will tackle discriminatory practices and other barriers to digital trade and outline a clear pathway to establish robust and mutually beneficial digital trade rules as part of the BTA.
In conclusion, the United States and India are eager to swiftly implement this framework and work towards finalizing the Interim Agreement, with the goal of establishing a mutually advantageous BTA, all aligned with the roadmap laid out in the Terms of Reference.
