The United States and India have reached a framework for an Interim Trade Agreement. The deal includes reciprocal tariff adjustments, a $500 billion I
The United States and India have officially announced a framework for an Interim Agreement regarding reciprocal and mutually beneficial trade. This new framework reaffirms the commitment to the broader U.S.-India Bilateral Trade Agreement (BTA) negotiations, originally launched by President Donald J. Trump and Prime Minister Narendra Modi on February 13, 2025.
According to the joint statement, the Interim Agreement represents a "historic milestone" in the partnership between the two countries, focusing on reciprocal and balanced trade based on mutual interests.
Key Economic Commitments
The framework outlines significant financial commitments and market shifts, most notably India’s intent to purchase $500 billion worth of specific U.S. goods over the next five years. The targeted sectors for this purchasing commitment include:
- Energy products
- Aircraft and aircraft parts
- Precious metals
- Technology products
- Coking coal
Additionally, both nations aim to significantly increase trade in technology products, specifically mentioning Graphics Processing Units (GPUs) and goods used in data centers.
Tariff Adjustments and Market Access
The agreement details a complex structure of tariff eliminations and reciprocal measures:
1. U.S. Exports to India:
India has committed to eliminate or reduce tariffs on all U.S. industrial goods and a wide range of food and agricultural products. Specific items listed include:
- Dried distillers’ grains (DDGs) and red sorghum for animal feed.
- Tree nuts, fresh and processed fruit.
- Soybean oil, wine, and spirits.
2. U.S. Tariffs on Indian Goods:
Under Executive Order 14257, the United States will apply a reciprocal tariff rate of 18 percent on originating goods from India. This covers sectors such as textiles and apparel, leather and footwear, plastics, rubber, organic chemicals, home décor, and artisanal products.
However, subject to the successful conclusion of the Interim Agreement, the U.S. will remove reciprocal tariffs on goods identified in the "Potential Tariff Adjustments for Aligned Partners Annex" to Executive Order 14346. These goods include:
- Generic pharmaceuticals
- Gems and diamonds
- Aircraft parts
3. National Security Tariff Modifications:
The United States will remove Section 232 tariffs on certain Indian aircraft and aircraft parts (previously imposed under Proclamations regarding Aluminum, Steel, and Copper). Reciprocally, India will receive a preferential tariff rate quota for automotive parts.
Addressing Non-Tariff Barriers
The joint statement highlights a commitment to removing non-tariff barriers that affect bilateral trade.
- Medical & ICT: India agrees to address barriers to U.S. medical devices and eliminate restrictive import licensing for U.S. Information and Communication Technology (ICT) goods.
- Standards: Within six months of the agreement's entry into force, India will determine if U.S.-developed or international standards are acceptable for U.S. exports in identified sectors.
Supply Chain and Digital Trade
The framework emphasizes strengthening "economic security alignment" to enhance supply chain resilience. This includes complementary actions to address non-market policies of "third parties," as well as cooperation on investment reviews and export controls.
Both countries also committed to addressing barriers to digital trade, aiming to set a pathway for robust rules as part of the broader BTA negotiations.
Future Outlook
The United States and India stated they will promptly implement this framework and work toward finalizing the Interim Agreement. The United States affirmed it intends to consider India’s request to lower tariffs on Indian goods during the ongoing BTA negotiations.
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