India and the United States have unveiled a framework for an Interim Trade Agreement, marking a significant milestone in bilateral economic relations and paving the way for a comprehensive India-US Bilateral Trade Agreement (BTA). The announcement comes alongside a major decision by Washington to roll back an additional 25% tariff imposed on Indian imports last year, signaling a reset in trade ties between the two strategic partners.
The framework reflects a broader convergence of economic, energy, defence, and national security interests, following months of negotiations under the BTA process launched in February 2025 by US President Donald J Trump and Prime Minister Narendra Modi.
The White House confirmed that the additional 25% duty, imposed in August 2025 over India’s purchase of Russian oil, terminated with effect from February 7, 2026.
The rollback follows a review of fresh information and recommendations from senior US officials. According to the executive order, India has taken “significant steps to address the national emergency” that led to the imposition of the penal tariff.
The order also clarified that refunds of duties already collected will be processed in accordance with US law and Customs and Border Protection procedures. However, Washington has retained the right to reconsider the tariff if India resumes importing Russian oil, underscoring a monitoring mechanism built into the decision.
The US administration stated that the decision was driven by India’s commitments on energy sourcing and defence cooperation, along with broader alignment with US national security concerns.
India has committed to stop directly or indirectly importing Russian Federation oil and to increase purchases of US energy products, including crude oil, LNG, and LPG. Additionally, India agreed to expand defence cooperation with the US over the next 10 years, a factor explicitly cited by the White House as central to the tariff rollback.
The executive order described the tariff modification as “necessary and appropriate,” while also making clear that compliance will be closely monitored going forward.
Under the interim framework, the United States will apply a reciprocal tariff of 18% on Indian-origin goods. This tariff will cover several sectors, including:
Once the interim agreement is finalised, a large number of Indian goods will enter the US market without tariffs. These include gems and diamonds, generic medicines, and aircraft parts, offering substantial relief to Indian exporters.
The US will also remove tariffs imposed under national security-related proclamations on steel, aluminium and copper, specifically for certain Indian aircraft and aircraft parts.
India will receive a special, lower-tariff quota for exporting automotive parts to the US, consistent with American national security rules under Section 232 provisions.
Additionally, subject to the findings of the US Section 232 investigation into pharmaceuticals, India will receive negotiated outcomes for generic pharmaceuticals and pharmaceutical ingredients, potentially opening a major growth avenue for India’s pharma sector.
As part of the interim framework, India has agreed to eliminate or reduce tariffs on all US industrial goods and a broad range of food and agricultural products. These include:
India has also agreed to ease long-standing non-tariff barriers faced by US goods such as medical devices, ICT products, and food and farm items. New Delhi will review US or international standards in these sectors within six months of the agreement coming into force.
Importantly, India granted a quota-based duty concession of only 5 lakh tonnes of DDGS, which is just 1% of India’s total consumption of 500 lakh tonnes, ensuring limited domestic impact.
Union Commerce Minister Piyush Goyal emphasised that India has fully protected sensitive agricultural and dairy sectors. Products such as rice, wheat, maize, milk, poultry, soy, fuel ethanol, cheese, tobacco, certain vegetables and meat have been excluded from tariff concessions.
The government has repeatedly stated that no duty concessions were granted on dairy, genetically modified (GM) products, meat, poultry, soya meal or corn, addressing concerns raised by farmers and opposition parties.
Both countries will establish strict rules of origin to ensure that the benefits of the agreement accrue primarily to India and the US, and not to third countries routing goods through them.
The framework also calls for enhanced cooperation on supply chains, scrutiny of sensitive investments, tighter export controls, and joint efforts to counter unfair trade practices by other nations.
India has announced plans to purchase approximately ₹500 billion worth of US goods over the next five years. These include:
The two countries will also significantly increase trade in technology products, including GPUs and equipment used in data centres, and work towards clear digital trade rules under the BTA.
Commerce Minister Goyal noted that India is likely to build 10 gigawatts of data centres, requiring high-quality machinery and advanced chips, much of which can be sourced from the US.
The India–US interim trade framework is positive for export-oriented sectors.
Gems and jewellery players such as Titan, Rajesh Exports, and Kalyan Jewellers may benefit from tariff-free access.
Pharma majors, including Sun Pharma, Dr Reddy’s, Cipla, Lupin, and Aurobindo Pharm,a gain from likely tariff removal on generics.
Auto component exporters like Bharat Forge, Samvardhana Motherson, and Sundram Fasteners benefit from preferential US quotas.
Textiles and home décor players such as Welspun Living, Trident, and Vardhman Textiles gain competitiveness.
Defence and aerospace names, including HAL, BEL, and L&T, benefit from deeper India-US defence cooperation.
Both India and the US have committed to promptly implementing the interim framework and accelerating negotiations to conclude a comprehensive Bilateral Trade Agreement under the agreed roadmap.
The joint statement described the Interim Agreement as a historic milestone, reaffirming a shared commitment to reciprocal, balanced and mutually beneficial trade, while aligning economic cooperation with broader strategic and security goals.
As negotiations move forward, the challenge for India will be to balance expanded market access with domestic safeguards, while navigating growing geopolitical expectations embedded within trade policy.
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