India-US Seal Interim Trade Framework with 18% Tariff Cut and $500 Billion Target

India and the United States have finalized an interim trade framework that lowers US tariffs on Indian goods to 18 percent, marking a significant step toward a broader Bilateral Trade Agreement (BTA) and a long-term goal of expanding two-way trade to $500 billion. The agreement also sees Washington withdraw the additional 25 percent duty it had earlier imposed on Indian imports.

Under the framework, India has agreed to lower or remove tariffs on all US industrial goods and on several American agricultural and food products. These include dried distillers’ grains, red sorghum for animal feed, tree nuts, fresh and processed fruits, soybean oil, wine, and spirits, aimed at improving US market access to India’s large consumer base.

On the US side, the 18 percent tariff will apply across a wide range of Indian exports, including textiles and apparel, leather and footwear, plastics and rubber products, organic chemicals, home décor, artisanal goods, and select machinery. If the interim agreement is fully concluded, the US is expected to remove reciprocal tariffs on several Indian products, such as generic medicines, gems and diamonds, and aircraft parts.

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A separate provision provides for the removal of tariffs on certain aircraft and aircraft components exported from India, supporting cooperation in the aerospace sector. Both countries have also committed to addressing non-tariff barriers that have historically complicated bilateral trade, with India agreeing to ease long-standing hurdles for US medical devices.

The framework outlines further reforms by India, including scrapping restrictive import licensing rules for US information and communication technology (ICT) goods and addressing non-tariff barriers affecting American food and farm products. These measures are intended to smoothen business operations and improve predictability for exporters on both sides.

Looking ahead, India plans to purchase $500 billion worth of US goods over the next five years, spanning energy, aircraft and parts, precious metals, technology products, and coking coal. Both sides will continue negotiations on the BTA, during which the US is expected to consider India’s request for further tariff reductions as the two countries deepen economic and technological cooperation.

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