The United States and India are excited to share a significant development in their ongoing partnership, having established a framework for an Interim Agreement aimed at fostering reciprocal and mutually advantageous trade. This announcement underscores the dedication of both nations to advancing the broader U.S.-India Bilateral Trade Agreement (BTA), a dialogue initiated by President Donald J. Trump and Prime Minister Narendra Modi on February 13, 2025. The BTA promises to enhance market access and bolster more resilient supply chains, marking this Interim Agreement as a crucial step forward in a collaborative relationship that emphasizes balanced trade rooted in shared interests and tangible results.
What’s included in this landmark Interim Agreement?
1. Tariff Adjustments: India has committed to removing or reducing tariffs on various U.S. industrial goods as well as a selection of agricultural products such as dried distillers’ grains (DDGs), red sorghum used for animal feed, tree nuts, fresh and processed fruits, soybean oil, wine, spirits, and several other items.
Reciprocal Tariff Rates: In response, the United States will impose a reciprocal tariff of 18 percent under Executive Order 14257 (from April 2, 2025). This rate will apply to certain originating goods from India, including textiles, leather goods, plastics, organic chemicals, home décor, artisanal crafts, and specific machinery. Moreover, pending successful negotiations of the Interim Agreement, the U.S. plans to eliminate this reciprocal tariff on a variety of goods specified in the Potential Tariff Adjustments for Aligned Partners Annex to Executive Order 14346 (dated September 5, 2025), which includes generic pharmaceuticals, gems, diamonds, and aircraft components.
Aircraft and Parts Tariffs: The United States also intends to lift tariffs on select Indian aircraft and their parts that were previously enforced due to national security concerns highlighted in Proclamations 9704 and 9705 (from March 8, 2018) and Proclamation 10962 (from July 30, 2025). Conversely, India will be granted a preferential tariff rate quota concerning automotive components governed by national security tariffs outlined in Proclamation 9888 (dated May 17, 2019). Depending on the findings from a U.S. Section 232 investigation, India may achieve negotiated outcomes related to generic pharmaceuticals and their ingredients.
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Rules of Origin: The establishment of rules of origin will ensure that the advantages of this agreement predominantly benefit the U.S. and India, thus fortifying their economic ties.
Non-Tariff Barriers: Addressing non-tariff barriers is also on the agenda. India has agreed to tackle long-standing issues affecting the trade of U.S. medical devices, streamline import licensing procedures for U.S. Information and Communication Technology (ICT) goods, and evaluate the acceptance of U.S. or international standards within six months of the agreement's enactment. Additionally, India will work towards resolving non-tariff barriers affecting U.S. food and agricultural exports.
Technical Standards Collaboration: To facilitate compliance with relevant technical regulations, discussions will be initiated between the U.S. and India regarding their respective standards and conformity assessment processes in mutually agreed sectors.
Tariff Changes Clause: Should either nation modify its agreed-upon tariffs, the other country retains the right to adjust its commitments accordingly.
Future Negotiations on Market Access: The U.S. expresses its commitment to consider India’s request for reduced tariffs on Indian goods in future BTA negotiations, further expanding market access opportunities.
Economic Security Alignment: Both nations aim to strengthen economic security through collaborative actions against third-party non-market policies and cooperation in reviewing inbound and outbound investments and export controls.
Investment in U.S. Products: India plans to invest $500 billion in U.S. energy products, aircraft, precious metals, and advanced technology over the next five years. This investment will significantly boost trade in technology products like Graphics Processing Units (GPUs) and foster joint technological development.
Digital Trade Framework: The United States and India also commit to addressing discriminatory practices and obstacles to digital trade, aiming to establish a clear path toward comprehensive and mutually beneficial digital trade regulations as part of the BTA.
In conclusion, the United States and India are eager to swiftly put this framework into action and finalize the Interim Agreement, with the ultimate goal of concluding a mutually advantageous BTA in alignment with the agreed roadmap outlined in the Terms of Reference.
