India and the United States have announced a framework for an interim trade agreement aimed at deepening economic ties, expanding market access, and strengthening bilateral cooperation on trade and investment. The trade deal represents progress in long-running negotiations between the two largest democracies and is viewed by New Delhi and Washington as a step toward a broader Bilateral Trade Agreement (BTA).

The framework was unveiled following discussions between Prime Minister Narendra Modi and U.S. President Donald J. Trump, who first launched formal talks on a comprehensive India-U.S. trade arrangement in February 2025.

Interim Framework Overview

Under the interim framework, both countries have agreed to substantial tariff reductions and preferential market access commitments, while also embedding safeguards for politically sensitive and strategic sectors in their respective economies. The agreement stops short of a full free-trade agreement but sets out structured commitments that could be built upon in future negotiations.

According to the joint statement issued by India and the U.S., the interim agreement emphasises mutual and reciprocal market access, rule-based trade enhancement, and sustained cooperation in areas of economic interest. It also commits both sides to work on non-tariff barriers to facilitate smoother trade flows.

Tariff Reductions and Market Access

One of the central features of the deal is reduction of mutually imposed tariffs on a wide range of goods:

• The United States will reduce its **reciprocal tariffs on Indian exports to 18 per cent from previous levels that reached up to 50 per cent on certain products, significantly improving access to the U.S. market. Tariffs will also be entirely eliminated for select Indian exports, including generic pharmaceuticals, gems and diamonds, and aircraft parts. 
• India has agreed to eliminate or reduce tariffs on all U.S. industrial goods and a broad spectrum of American food and agricultural products, including dried distillers’ grains (DDGs), red sorghum for animal feed, tree nuts, fresh and processed fruits, soybean oil, wine and spirits. 

The reciprocal tariff arrangement is expected to open up significant opportunities for Indian exporters in traditional and emerging sectors, while also making a range of American products more competitive within India’s markets.

Agriculture and Sensitive Sector Protections

A major concern throughout negotiations has been safeguarding India’s agricultural and rural economy, which supports a vast portion of the population. Commerce and Industry Minister Piyush Goyal has repeatedly emphasised that the deal will fully protect sensitive agricultural and dairy products from tariff concessions. Products explicitly shielded include:

• Staple crops such as maize, wheat, rice and soya
• Dairy and poultry products including milk, cheese and meat
• Other items critical to rural livelihoods such as ethanol (fuel), tobacco and certain vegetables

These protections are intended to prevent adverse impacts on the livelihoods of farmers, smallholder producers and rural communities, who form the backbone of India’s agricultural economy. 

At the same time, India has offered zero-duty access for its farm products entering the U.S. market, including items such as spices, tea, coffee, coconut and coconut oil, cashew nuts, certain fruits like mangoes, bananas and pineapples, bakery products and vegetable waxes. This is expected to enhance export earnings for agricultural producers and MSMEs.

Sectoral Gains and Strategic Outcomes

The interim framework includes sectoral provisions designed to boost trade and cooperation across diverse industries:

• Pharmaceuticals and Medical Devices: Zero tariffs on generic drugs and improved regulatory alignment are expected to bolster India’s strong position in the U.S. pharmaceutical market. 
• Aerospace and Defence: Eliminating tariffs on aircraft parts and securing Section 232 exemptions are expected to benefit aerospace trade and support defence and commercial aircraft manufacturing. 
• Manufacturing and ICT Goods: Commitments to address non-tariff barriers and streamline standards are expected to facilitate trade in information and communication technology (ICT) products and select machinery. 
• Auto Components and Heavy Industry: The agreement anticipates tariff rate quotas for auto parts and preferential access for certain manufactured goods, enhancing industrial trade cooperation. 

Combined, these measures aim to reduce supply chain friction, attract investment, and support India’s Make in Indiainitiative by integrating domestic production more closely with global value chains.

Energy and Long-term Procurement Commitments

As part of the broader economic engagement, India has signalled intentions to import approximately USD 500 billion worth of goods from the United States over the next five years. These imports include energy products such as crude oil, liquefied natural gas (LNG) and liquefied petroleum gas (LPG), along with aircraft and aircraft parts, technology products, precious metals and coking coal. These procurement commitments align with India’s strategy of diversifying its energy sources and deepening strategic economic ties with the U.S. .

Expected Economic Impact

Commerce Minister Goyal has described the interim framework as a “historic and equitable agreement” that could potentially open a US$ 30 trillion market for Indian exporters. This expanded access is expected to deliver significant benefits for micro, small and medium enterprises (MSMEs), artisans, agricultural producers and women- and youth-led businesses by removing tariff barriers in the U.S. market. 

Key economic gains envisaged include:

• Boost to Indian exports in textiles, leather and footwear, plastic and rubber products, organic chemicals, home decor, artisanal goods and select machinery. 
• Increased competitiveness for Indian pharmaceutical and aerospace sectors through zero tariff access. 
• Enhancement of India’s MSME ecosystem through sustained preferential access and reduced non-tariff barriers. 

Political and Analytical Perspectives

The trade framework has drawn both support and criticism within India. Proponents highlight its potential to create jobs, expand market reach for diverse sectors and attract foreign direct investment. Several state leaders have welcomed the deal as a step forward for economic growth and industrial development. 

Critics — including farmer unions and opposition figures — argue that the framework lacks sufficient detail and may expose certain sectors to unfair competition, particularly if tariff reductions are asymmetric. Concerns have been raised about the long-term impact on domestic agriculture and industrial policies. 

Why the Deal Matters

The interim India-U.S. trade deal is significant on multiple fronts:

• It marks a milestone in trade relations between the world’s two largest democracies, anchoring economic cooperation alongside strategic and defense ties. 
• It represents a shift in India’s trade policy, balancing openness with protection for sensitive sectors while pursuing broader market access. 
• For the United States, it strengthens economic engagement with a high-growth market and supports bilateral cooperation on technology, supply chains and industrial standards. 

The interim framework is seen as a foundation for a more comprehensive trade agreement that both countries hope to finalize in the coming months, with ongoing negotiations expected to refine details and expand cooperation across additional sectors.