India–US Interim Trade Deal: India and the United States have taken a major step toward resetting bilateral trade relations by announcing an interim trade framework that reduces US reciprocal tariffs on Indian goods to 18%. The announcement, made on February 6, follows months of negotiations and comes ahead of a more comprehensive Bilateral Trade Agreement that both sides are still working to finalise.
The interim deal was first signalled by US President Donald Trump on Truth Social earlier this month and later confirmed by Prime Minister Narendra Modi on social media. While initial statements lacked detailed clarity, the newly released framework outlines the scope of tariff reductions and market access commitments that are expected to benefit key Indian export sectors.
Under the agreement, India has committed to eliminating or lowering tariffs on a broad range of US industrial goods and agricultural products. These include dried distillers’ grains, red sorghum used for animal feed, tree nuts, fresh and processed fruits, soybean oil, wine, spirits and other food products. In exchange, Washington will apply a reduced reciprocal tariff rate of 18% on Indian-origin goods, with the possibility of further reductions as talks continue.
The United States will impose the 18% tariff on several major Indian export categories, including textiles and apparel, leather goods and footwear, plastic and rubber products, organic chemicals, home décor items, artisanal and handicraft products, and select machinery. These sectors together account for a substantial share of India’s exports to the US, making the tariff cut particularly significant for manufacturers and exporters.
The framework also signals future relief for high-value Indian exports. Subject to the successful conclusion of the interim agreement, reciprocal tariffs are expected to be removed on a wide range of goods, including generic pharmaceuticals, gems and diamonds, and aircraft parts. India will also receive a preferential tariff-rate quota for automotive components currently covered under US national security-related trade restrictions. Any further concessions on pharmaceutical products will depend on the outcome of the ongoing US Section 232 investigation.
For Indian exporters, the agreement marks a sharp turnaround from last year, when India faced a combined 50% tariff burden from the US. That included reciprocal duties as well as additional penalties linked to India’s purchase of Russian oil. With the new framework in place, India now enjoys one of the lowest US tariff rates in Asia, second only to Japan.
In comparison with other global economies, India’s position appears relatively strong. China continues to face significantly higher tariffs, while Brazil, South Africa and several Southeast Asian nations remain subject to steeper rates. Even among South Asian neighbours, India now fares better than Bangladesh and Vietnam, and remains competitive with Pakistan and Malaysia.
The market reaction to the announcement has been positive. Shares of textile, apparel and export-oriented manufacturing companies have seen strong gains, reflecting investor optimism about improved access to the US market. Industry leaders believe the tariff reduction will help Indian exporters regain price competitiveness, attract fresh orders and strengthen supply chains at a time of global trade realignment.
Officials from both countries have described the interim framework as a milestone in India–US economic relations, emphasising a shared commitment to balanced and reciprocal trade. Negotiations will now continue toward a full Bilateral Trade Agreement, which is expected to cover services, digital trade, investment protection and long-term tariff alignment.
If finalised, the broader agreement could open up a multi-trillion-dollar market for Indian businesses and significantly deepen economic ties between New Delhi and Washington, positioning India as a key trade partner for the United States in the years ahead.