U.S. and India reach provisional trade framework: U.S. tariffs on India reduced to 18%, India commits to purchasing $500 billion worth of U.S. products over five years.

U.S. and India reach provisional trade framework: U.S. tariffs on India reduced to 18%, India commits to purchasing $500 billion worth of U.S. products over five years.

The US and India announced on Friday that they had reached a framework for a provisional trade agreement, ending months of trade deadlock.

According to CCTV News, the US and India announced that both sides had reached a provisional framework for mutually beneficial trade, which reaffirms both countries’ commitment to broader US-India bilateral trade agreement negotiations. The agreement, launched by US President Trump and Indian Prime Minister Modi on February 13, 2025, will include more market access commitments.

According to the joint statement, India will open its market to most US industrial goods and some agricultural products, and the US will impose a so-called "reciprocal tariff" of 18% on goods originating in India. The agreement explicitly includes India’s commitment to purchase a total of $500 billion of US goods over five years, covering sectors such as energy, aviation, metals, and technology products—about twice the current amount India imports from the US.

Notably, Trump confirmed in an executive order that India has pledged to stop importing Russian oil directly or indirectly. In exchange, the US will lift the previous 25% punitive tariff imposed on Indian goods.

The market reacted positively, with the Indian rupee recording its largest single-day gain in seven years following the announcement of the agreement. Analysts pointed out that the framework provides a clear pathway for US energy, aviation, and agricultural exports and also brings relatively stable market access expectations for Indian textile, leather, and machinery manufacturing export sectors.

Tariff changes in exchange for Russian oil ban

In a Friday evening executive order, Trump clarified that the temporary US-India trade agreement was based on three key commitments from India: stopping direct or indirect imports of Russian oil, increasing purchases of US energy products, and expanding defense cooperation with the US. Based on these commitments, the US decided to remove the additional tariffs previously imposed on Indian goods.

The executive order also set clear mechanisms for monitoring and enforcement. The US will monitor whether India resumes importing Russian oil. If violations are found, the US will consider "additional measures" including re-imposing the 25% tariff. Previously, the Trump administration imposed a total 50% tariff on Indian goods, with 25% specifically defined as punitive, due to India’s purchases of Russian oil (which the US claimed funded the war in Ukraine).

Currently, the Modi government has not specified how it will end imports of Russian oil. Although import volumes have decreased, Russia remains India’s largest crude supplier. Indian Commerce Minister Piyush Goyal refused to comment on this at the press conference, saying only that the ministry of foreign affairs would respond.

India pledges lower tariffs and $500 billion in US imports

According to the US-India joint statement, India pledges to open its market to most US industrial products as well as a wide range of food and agricultural products, eliminating or reducing tariffs on items including dried distillers grains, feed sorghum, nuts, fruits, soybean oil, wines, and spirits.

Meanwhile, India agreed to address longstanding non-tariff barriers affecting bilateral trade, notably eliminating "restrictive import licensing procedures." Both sides plan to complete negotiations within six months, promoting acceptance of US or internationally recognized safety and licensing standards in areas such as agricultural products, medical devices, and communications equipment.

Regarding procurement commitments, India plans to purchase $500 billion worth of US goods over the next five years, covering energy (oil, natural gas, coking coal), aviation products (aircraft and parts), precious metals, and technology products. The technology category explicitly includes graphics processing units (GPUs) for artificial intelligence and data center-related equipment. As a reciprocal arrangement, India will receive tariff reductions equivalent to US trade agreement partners on certain aircraft and parts, and enjoy lower tariff import quotas for auto parts.

India holds the line on sensitive sectors; opposition questions benefits

Under the US-India trade agreement framework, India adopted a clear defensive stance on agricultural market access issues. Despite US pressure, New Delhi succeeded in excluding key agricultural goods and dairy products—corn, wheat, rice, soybeans, poultry, milk, and cheese—from broad market opening. The agreement does not include provisions for accepting genetically modified agricultural products. Commerce Minister Goyal emphasized the agreement "fully protects" sensitive domestic agricultural sectors, stating that specific imports like apples will be managed using tariff quotas.

Goyal also said, the agreement opens up a $30 trillion US market for Indian farmers, fishers, and small and medium enterprises. However, opposition parties raised criticisms. The Congress Party noted that Indian exports to the US will face higher tariff barriers than before, with its spokesperson criticizing the tangible benefits of the agreement as limited.

US sets 18% benchmark tariff for India; pharmaceutical arrangements pending

Under the agreement framework, the US will impose an 18% tariff on major imports from India, covering textiles and apparel, leather and footwear, plastics and rubber, organic chemicals, home decor, handicrafts, and some machinery products. The joint statement also noted that, based on the Trump government's tariff investigation findings on pharmaceuticals and ingredients, India will achieve corresponding negotiation results for generic drugs and related ingredient tariffs.

The US confirmed that it will consider India's requests for further tariff reductions on its goods in upcoming bilateral trade agreement talks. Commerce Minister Goyal previously said both sides plan to formally sign a trade agreement in March this year, after which the tariff reduction measures for Indian exports to the US will officially take effect. This trade breakthrough follows India’s trade agreement with the EU last month and marks the continued opening of India’s long-protected market. US Trade Representative Greer stated in a release that the agreement "reduces tariff barriers for all US industrial goods and a wide range of agricultural products."

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