In a significant development for bilateral trade relations, the United States and India have introduced a new trade framework that is expected to serve as a foundational step toward a more extensive trade agreement between the two nations. This framework emerged from negotiations initiated by President Donald J. Trump and Prime Minister Narendra Modi on February 13, 2025.
The White House has announced that both countries are committed to finalizing this interim agreement as a preliminary measure, with the eventual goal of establishing a comprehensive trade pact that encompasses a wider range of economic activities and sectors. The agreement exemplifies a shared intention to cultivate a balanced trade relationship, fortify resilient supply chains, and facilitate broader market access to stimulate economic growth and cooperation.
Tariff Adjustments and Market Access Commitments
As part of the framework, India has agreed to reduce or eliminate duties on a variety of U.S. industrial and agricultural products. Key agricultural items included in these concessions cover animal feed inputs, tree nuts, fruits, soybean oil, as well as wine and spirits. This move reflects India's willingness to open its markets more widely to U.S. exports in selected sectors.
Conversely, the United States has imposed a reciprocal tariff rate of 18% on goods originating from India, as mandated by an existing executive order. This initial rate applies to categories such as textiles, apparel, chemicals, plastics, leather goods, footwear, home décor, artisanal products, and machinery. This reciprocal approach represents an effort to balance market exposure and safeguard domestic industries while engaging in enhanced trade cooperation.
Conditional Tariff Reliefs and Security Considerations
Washington has committed to removing reciprocal tariffs on certain categories contingent upon the successful implementation of the framework’s provisions. These categories include generic medicines, gems, diamonds, and components related to aircraft. Notably, the United States also plans to lift specific security-based tariffs on Indian aircraft parts, which ties back to earlier proclamations addressing imports of aluminum, steel, and copper.
Further, India is set to benefit from a preferential tariff-rate quota for automotive components, although this relief will remain subject to United States national security requirements. The pharmaceutical sector's outcomes depend heavily on the pending investigations under Section 232. Officials have indicated that future negotiations would aim to address issues concerning generic medicines and critical ingredients if the investigation results permit such accommodations.
Addressing Non-Tariff Barriers and Standardization
Acknowledging longstanding obstacles, India has committed to easing non-tariff barriers impacting imports of U.S. medical devices and technology products. The country also plans to reassess testing standards applicable to U.S. exports within a six-month timeframe. This reassessment is expected to align certification processes and reduce administrative bottlenecks that have previously hindered market entry.
Both nations have agreed to continue discussions on standards and conformity assessment procedures, aiming to simplify compliance for businesses across agreed sectors. In addition, they have pledged to tackle discriminatory practices affecting digital services and established a pathway toward incorporating binding digital trade provisions within the broader trade agreement.
Cooperation on Investment, Export Controls, and Supply Chain Security
The framework outlines increased collaboration on investment review processes, export control measures, and the enhancement of supply chain security protocols. A particular emphasis is placed on addressing non-market activities undertaken by third countries that could disrupt trade or supply chain stability. This focus underscores a strategic alignment aimed at safeguarding economic interests amidst global geopolitical challenges.
Trade Expansion and Sector-Specific Deals
India has announced intentions to procure $500 billion worth of goods from the United States over the next five years, spanning sectors such as energy, aircraft, metals, technology, and coking coal. This substantial purchase commitment signals a bolstering of energy and industrial links between the two nations.
Further expanding the aircraft sector cooperation, Commerce Minister Piyush Goyal has reportedly indicated that India is prepared to place Boeing aircraft orders totaling up to $80 billion. Beyond aircraft acquisitions, engines and spare parts could elevate U.S. imports related to aviation beyond the $100 billion mark. These developments underscore the importance of aviation and aerospace industries within the evolving trade relationship.