After 10 Months of Tariff Deadlock, US and India Find Common Ground on Trade

After 10 months of escalating tariffs that pushed duties on Indian goods to 50 percent, the US and India just hit reset. The February 6, 2026, announcement slashes tariffs to 18 percent and unlocks a US$500 billion purchasing commitment—the biggest bilateral trade pivot in recent times.

For businesses, the shift is decisive: from prolonged negotiations to on-ground execution, reducing trade uncertainty and creating fresh momentum across manufacturing, agriculture, technology, and strategic supply chains.

The United States and India have announced a framework for an interim agreement on reciprocal and mutually beneficial trade, marking a significant advance in their bilateral economic relationship. As per the Ministry of Commerce and Industry, the trade framework reinforces both governments’ commitment to concluding a broader US-India Bilateral Trade Agreement (BTA), negotiations for which were formally launched by US President Donald J. Trump and India’s Prime Minister Narendra Modi on February 13, 2025.

Under the joint statement issued by India and the US on February 6, 2026, the interim agreement aims to deliver early market access gains, promote more balanced trade outcomes, and strengthen supply chain resilience ahead of a comprehensive BTA. For businesses, the framework signals a shift from intent-based cooperation to implementation-focused trade liberalization, with near-term implications across manufacturing, agriculture, technology, and strategic sectors.

Companies with exposure to manufacturing, agribusiness, aerospace, automotive, pharmaceuticals, and technology should move toward operational readiness, while maintaining active oversight of policy developments. Recalibrating sourcing, pricing, market entry, and compliance strategies is now timely but the transition to a full BTA will depend on sustained political goodwill, favorable commercial outcomes, and broader geopolitical externalities shaping global trade conditions. – Melissa Cyrill, Asia Briefing

Political endorsement and strategic signalling

Modi has welcomed the framework, describing it as a positive development for both economies and a reflection of the growing depth, trust, and dynamism of the India-US partnership. He credited Trump’s personal engagement in advancing bilateral ties, underscoring the political momentum behind the agreement.

Modi has emphasized that the interim agreement would reinforce the ‘Make in India’ initiative by opening new opportunities for farmers, entrepreneurs, MSMEs, start-up innovators, and fishermen. He highlighted the framework’s potential to generate large-scale employment, an important signal for labor-intensive sectors and regional manufacturing clusters.

He further noted that the agreement would deepen investment and technology collaboration, strengthen resilient and trusted supply chains, and contribute to global economic growth.

US-India trade agreement: Key updates and what matters

1. Tariff reset: US cuts duties on Indian exports to 18 percent

The US has reduced tariffs on Indian goods from 50 percent to 18 percent, easing pressure on exporters and restoring competitiveness versus regional peers.

2. Penal tariffs scrapped over Russian oil purchases

President Trump has signed an executive order removing the earlier 25 percent penalty imposed on India for crude oil imports from Russia.

3. Zero-duty access for high-value Indian exports

Gems and diamonds, pharmaceuticals, smartphones, select agricultural products, tea, coffee, fruits, and handicrafts will attract zero reciprocal tariffs in the US.

4. Agriculture and dairy safeguarded

India has opened limited access to US agricultural products such as DDGS, wines, and spirits, while protecting sensitive sectors including dairy, rice, and millets.

6. Duty concessions granted to the US in select sectors

India has offered tariff concessions on alcoholic beverages, cosmetics, medical devices, and specific agri-inputs, with safeguards such as minimum import prices.

7. Export sectors poised for immediate gains

Engineering goods, electronics, textiles, gems and jewelry, pharmaceuticals, and MSME-driven handicrafts are expected to see faster order inflows.

India gains a tariff advantage after February 2026 reset

The February 2026 interim trade framework restores India’s competitiveness across key export sectors. This places India below or at par with most major Asian and emerging-market competitors, reversing the tariff escalation seen through much of 2025.

Source: Trade Compliance Resource Hub

Market access and tariff commitments: Early commercial gains

India’s market access commitments

Under the interim trade framework, India has agreed to eliminate or reduce tariffs on all US industrial goods and a wide range of US food and agricultural products. Key product categories covered include:

• Dried distillers’ grains (DDGs)
• Red sorghum for animal feed
• Tree nuts
• Fresh and processed fruits
• Soybean oil
• Wine and spirits
• Additional agricultural and food products

For US exporters, this represents improved price competitiveness in the Indian market, particularly in agri-processing, food inputs, and industrial manufacturing.

US tariff commitments benefiting Indian exporters

The US will apply a reciprocal tariff rate of 18 percent on originating Indian goods under Executive Order 14257 (Regulating imports with a reciprocal tariff to rectify trade practices that contribute to large and persistent annual United States goods trade deficits). Affected sectors include:

• Textiles and apparel
• Leather and footwear
• Plastics and rubber
• Organic chemicals
• Home décor and artisanal products
• Certain machinery

However, subject to the successful conclusion of the interim agreement, the US has committed to removing reciprocal tariffs on a wide range of Indian goods listed in the Potential Tariff Adjustments for Aligned Partners Annex to Executive Order 14346 (September 5, 2025). These include:

• Generic pharmaceuticals
• Gems and diamonds
• Aircraft parts

For Indian exporters, this creates a clear pathway toward tariff relief in high-value and employment-intensive sectors.

National security tariffs and sector-specific relief

The framework also addresses long-standing trade frictions arising from US national security tariffs:

• The US will remove tariffs on certain Indian aircraft and aircraft parts imposed under Section 232-related proclamations covering aluminum, steel, and copper imports.
• India will receive a preferential tariff-rate quota for automotive parts subject to US national security tariffs on automobiles and auto components.
• Negotiated outcomes for generic pharmaceuticals and pharmaceutical ingredients will be finalized contingent on the findings of the US Section 232 investigation in this sector.

These provisions are particularly relevant for aerospace, automotive, and pharmaceutical companies navigating compliance-heavy US trade regimes.

Preferential market access, Rules of Origin (RoO), and trade remedies

Both countries have committed to providing sustained preferential market access in sectors of mutual interest. To safeguard the integrity of these benefits:

• Robust rules of origin will be established to ensure that the advantages of the agreement accrue primarily to Indian and US producers.
• In the event that either country modifies agreed tariff levels, the other party retains the right to adjust its commitments, preserving balance and reciprocity.

For businesses, these provisions underscore the importance of supply chain structuring and origin compliance.

Addressing non-tariff barriers and regulatory alignment

Beyond tariffs, the framework places strong emphasis on reducing non-tariff barriers that have historically constrained bilateral trade.

India has agreed to address long-standing issues affecting US exports, including the following:

• Market access barriers for US medical devices
• Restrictive import licensing procedures and quantitative controls on US information and communication technology (ICT) products
• A determination, within six months of the agreement’s entry into force, on whether US or international standards, including testing requirements, will be accepted in identified sectors

India will also work to resolve persistent non-tariff barriers affecting US food and agricultural products.

To enhance ease of compliance, both countries intend to engage in discussions on standards and conformity assessment procedures in mutually agreed sectors, an important development for regulated industries.

Digital trade and economic security cooperation

The US and India have agreed to address burdensome digital trade practices and to establish a pathway toward robust, ambitious, and mutually beneficial digital trade rules under the BTA.

In parallel, both sides will strengthen economic security alignment by:

• Enhancing supply chain resilience
• Coordinating responses to non-market policies of third countries
• Cooperating on inbound and outbound investment reviews
• Aligning export control frameworks

These commitments reflect a convergence of trade policy and strategic economic governance.

Strategic purchases and technology collaboration

As part of the broader economic engagement, India has indicated its intention to purchase US$500 billion worth of US goods over the next five years, including:

• Energy products
• Aircraft and aircraft parts
• Precious metals
• Technology products
• Coking coal

Bilateral trade in technology products, particularly graphics processing units (GPUs) and data center-related goods, is expected to expand significantly, alongside deeper joint cooperation in advanced technologies.

Path forward: From framework to a balanced trade agreement

With the first set of official announcements, both India and the US have committed to promptly implementing the framework and finalizing the interim agreement while continuing negotiations toward a comprehensive and mutually beneficial BTA, in line with the agreed Terms of Reference.

The US has also indicated that India’s request for further tariff reductions on Indian exports will be considered during the BTA negotiations. For businesses and investors, the framework provides early clarity on direction while signaling that broader market access and regulatory alignment remain firmly on the negotiating agenda.

US-India tariff negotiations timeline: From escalation to reset

The February 2026 agreement marks the culmination of nearly 10 months of uneven and politically charged tariff negotiations between India and the US, during which trade policy increasingly intersected with geopolitics, energy security, and supply-chain realignment.

Early engagement and stalled progress (Q1-Q2 2025)

India was among the first countries to engage the Trump administration after the April 2, 2025, announcement of country-specific reciprocal tariffs. Initial negotiations focused on lowering baseline tariff levels and restoring predictability for exporters. However, talks progressed slowly, with key disagreements emerging over:

1. Agricultural and dairy market access, particularly US demands for wider entry into India’s protected farm sectors
2. Non-tariff barriers, including standards, licensing, and regulatory approvals
3. Energy trade and geopolitical alignment, especially India’s continued purchases of Russian oil

Despite multiple rounds of discussions during the 90-day suspension window, no early breakthrough was achieved.

Tariffs as negotiating leverage (Q3 2025)

By mid-2025, tariffs became an explicit negotiating tool. The US extended the suspension deadline to August 1, 2025, but simultaneously finalized trade agreements with the European Union (EU), Vietnam, and Indonesia, raising pressure on India to accelerate concessions.

Trump’s July 30, 2025, statement, followed by the August 6 signing of Executive Order 14329, signaled a shift from negotiation to enforcement. The executive order effectively raised the total tariff burden on many Indian imports into the US to as high as 50 percent, making it among the most punitive tariff actions by Washington.

Renewed momentum and convergence (Q4 2025-January 2026)

Following the operationalization of the reciprocal tariffs in late August 2025, both US and India returned to the negotiating table under intensified commercial and political pressure. Indian exporters faced immediate margin compression, while US importers and downstream industries raised concerns over rising costs and supply disruptions.

By January 2026, US Trade Representative Jamieson Greer publicly acknowledged that India had made “substantial progress” in talks, even as certain elements, most notably energy imports and agricultural access, remained unresolved. Negotiations have focused on:

• A tariff rollback framework rather than full elimination
• Time-bound commitments instead of permanent concessions
• Linking tariff relief to strategic purchases and investment flows

February 2026 breakthrough: A negotiated tariff reset

The February 2026 agreement includes reduction of US tariffs on Indian goods from 50 percent to 18 percent, providing immediate commercial relief.

From a negotiating standpoint, the outcome underscores three key dynamics:

1. Tariffs functioned as leverage, not an end goal, pushing both sides toward a reset once economic costs mounted.
2. Strategic considerations, energy security, supply-chain resilience, and geopolitical alignment became central to trade outcomes, extending negotiations beyond traditional market access issues.
3. The agreement prioritizes predictability and confidence restoration over full liberalization, reflecting the realities of fragmented global trade and election-driven policymaking.

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