India, US reach framework for interim trade agreement; tariffs on India cut to 18%

Washington/New Delhi, Feb 7 (PTI) India and the US on Saturday announced that they have reached a framework for an interim trade agreement under which tariffs on New Delhi will be reduced to 18 per cent.

As per the agreement, India will eliminate or reduce tariffs on all US industrial goods and a wide range of American food and agricultural products, including dried distillers' grains, red sorghum for animal feed, tree nuts, fresh and processed fruit, soybean oil, wine and spirits, and additional products.

"The US and India are pleased to announce that they have reached a framework for an Interim Agreement regarding reciprocal and mutually beneficial trade," a joint statement issued by both the countries said.

It added that the framework reaffirms the countries' commitment to the broader US-India Bilateral Trade Agreement negotiations launched by President Donald J Trump and Prime Minister Narendra Modi on February 13, 2025, which will include additional market access commitments and support more resilient supply chains.

As per the key terms of the agreement, the US will reduce the import duty on Indian goods to 18 per cent.

In August last year, the US imposed a 25 per cent reciprocal tariff and an additional 25 per cent levy on India over its purchase of Russian oil. Indian exporters were hit hard by the 50 per cent tariffs, as America is their largest export destination.

The reduction in the tariffs will help boost exports of India's labour-intensive sectors such as textile and apparel, leather and footwear, plastic and rubber, organic chemicals, home decor, artisanal products and certain machinery.

Subject to the successful conclusion of the interim agreement, tariffs will go down to zero on a wide range of goods, including generic pharmaceuticals, gems and diamonds, and aircraft parts, thereby further enhancing India's export competitiveness and the Make in India campaign, according to the statement.

It said the US will also remove tariffs on certain aircraft and aircraft parts of India.

"Similarly, consistent with the US national security requirements, India will receive a preferential tariff rate quota for automotive parts subject to the tariff imposed to eliminate threats to national security," it added.

The statement said that both the countries commit to provide each other preferential market access in sectors of respective interest on a sustained basis.

The two will also establish rules of origin that ensure that the benefits of the agreement accrue predominantly to the US and India.

Further it was agreed that the two will address non-tariff barriers that affect bilateral trade, which stood at over USD 191 billion.

The statement said that India has agreed to address long-standing barriers to the trade in US medical devices.

Besides, New Delhi has agreed to eliminate restrictive import licensing procedures that delay market access or impose quantitative restrictions on USA's information and communication technology goods.

"Recognising the importance of working together to resolve long-standing concerns, India also agrees to address long-standing non-tariff barriers to the trade in US food and agricultural products," the statement said.

"India intends to purchase USD 500 billion of US energy products, aircraft and aircraft parts, precious metals, technology products, and coking coal over the next five years," it added.

India and the US will significantly increase trade in technology products, including Graphics Processing Units and other goods used in data centres, and expand joint technology cooperation.

For the purposes of enhancing ease of compliance with applicable technical regulations, the two countries have planned to discuss their respective standards and conformity assessment procedures for mutually agreed sectors.

"In the event of any changes to the agreed upon tariffs of either country, the United States and India agree that the other country may modify its commitments," it said, adding that both will work towards further expanding market access opportunities through negotiations under the Bilateral Trade Agreement (BTA).

"The United States affirms that it intends to take into consideration, during the negotiations of the BTA, India's request that the US continue to work to lower tariffs on Indian goods," it said.

The joint statement said that America and India have agreed to strengthen economic security alignment to enhance supply chain resilience and innovation through complementary actions to address non-market policies of third parties, as well as cooperation on inbound and outbound investment reviews and export controls.

They have agreed to address discriminatory or burdensome practices and other barriers to digital trade.

The two, it said, will promptly implement this framework and work towards finalising the Interim Agreement with a view to concluding a mutually beneficial BTA consistent with the roadmap agreed in the Terms of Reference. PTI RR RUK RUK