Key Takeaways
- On February 6, the U.S. and India agreed to a framework for an interim trade deal that substantially reduces bilateral tariffs. The U.S. has committed to lowering applied rates on Indian exports from 50% to 18%, while India has committed to cut or eliminate tariffs on most U.S. industrial and agricultural goods while keeping select sensitive farm sectors protected.
- The same day, the U.S. issued an executive order eliminating its 25% penalty tariff on India for its imports of Russian oil, contingent on India ending such purchases. India has agreed to buy USD 500 billion in U.S. energy, industrial, and technology products, among other goods over the next five years.
- The framework includes commitments on expanding technology trade and cooperation, including increased flows of Graphics Processing Units (GPUs) and other data center equipment, and calls for closer alignment on economic security, supply chain resilience, investment review, and export control coordination.
- India pledged to tackle long standing non-tariff barriers affecting U.S. medical devices, information and communications technology goods, and agricultural products. Both sides agreed to pursue clearer standards, conformity assessment procedures, and rules of origin, though timelines remain undefined.
- Digital trade remains largely unresolved, but the two sides have committed to reducing digital trade barriers and working toward comprehensive digital trade rules as part of a future bilateral trade agreement (BTA).
- The interim agreement is expected to be finalized by this March, after which negotiations will continue toward a more comprehensive BTA. Outstanding issues such as digital trade, non-tariff barriers, and sensitive market access questions still require substantial work.
- For businesses, this framework agreement highlights new potential market opportunities across manufacturing sectors. However, long term gains will depend on how quickly the remaining regulatory, standards, and digital trade issues are resolved as the two sides continue to negotiate a broader BTA.