US–India trade talks yield breakthrough following tariff dispute

Washington and New Delhi have announced they reached a framework for an interim trade agreement, bringing an end to a dispute that lasted several months between the government of Narendra Modi and the administration of Donald Trump.

The two countries confirmed the agreement just days after Trump held a conversation with Modi. During that call, India said it would stop purchasing Russian oil. Trump’s administration had previously placed a 50 per cent tariff on goods coming from India.

India commits to $500bn in US imports

Under the new arrangement, India will allow imports of most industrial goods from the United States along with certain food products. Indian goods shipped to America will be charged an 18 per cent “reciprocal” tariff, according to a joint statement that New Delhi released early Saturday morning with additional details about the deal.

India also said it “intends” to buy $500bn worth of energy, aircraft and aircraft parts, metals, technology products, and coking coal from the United States over the next five years. This target represents roughly twice what India currently imports from America.

Both nations also agreed to tackle non-tariff barriers that affect trade. India promised to get rid of “restrictive import licensing procedures,” which has been a source of frustration in commercial relations between the two countries for a long time.

The US and India agreed last year to work toward a bilateral trade pact when Modi visited Washington. However, those discussions hit a wall and both sides dug in their heels. This included India’s refusal to open its large agricultural market. The Trump administration responded by slapping a 50 per cent tariff on India, which included a 25 per cent charge specifically because New Delhi was buying Russian oil. The US said these purchases were helping to pay for the war in Ukraine.

In an executive order published late Friday in the United States, Trump said India “has committed to stop directly or indirectly importing Russian Federation oil.” The country also committed to purchase US energy products and recently agreed to expand defense cooperation with America. The president had “determined to eliminate the additional ad valorem rate of duty imposed on imports” from India, the order stated.

The Modi government has not shared specifics on how it plans to end oil purchases from Russia. Although imports have dropped, Russia is still India’s biggest supplier of crude oil.

“Great news for India and USA!” Modi wrote in a post on X. “We have agreed on a framework for an Interim Trade Agreement between our two great nations.” He thanked Trump for his “personal commitment to robust ties between our countries.”

US Trade Representative Jamieson Greer said in a statement that “President Trump’s dealmaking is unlocking one of the largest economies in the world for American workers and producers, lowering tariffs for all US industrial goods and a wide array of agricultural products.”

During negotiations, India held firm on protecting its politically sensitive foodgrain and dairy markets. But in the joint statement, India said it would remove or reduce tariffs for a wide range of US food and agricultural products.

Piyush Goyal, the commerce minister, said the understanding with the US would “open a $30tn market for Indian exporters.” He added that the agreement with America would “completely protect” India’s sensitive agricultural and dairy products.

Digital trade included in framework

The United States and India have also officially included digital trade within the scope of their proposed bilateral trade agreement under the interim framework announced on February 7. This expands negotiations beyond tariffs and goods to include rules for digital commerce.

In a joint statement released with the framework, both sides said they would address “discriminatory or burdensome practices and other barriers to digital trade.” The inclusion of digital trade represents a notable change in the talks, as India has historically stayed away from binding digital trade commitments in trade agreements.

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