NEW DELHI/WASHINGTON: India and the United States have finalised a landmark interim trade agreement, slapping a reciprocal tariff of just 18% on Indian exports to the US—down from the earlier 25%—while New Delhi opens its market for a wide range of American industrial and agricultural goods [citation:2][citation:10]. The deal, announced after a call between Prime Minister Narendra Modi and President Donald Trump, marks a historic reset in bilateral economic ties [citation:2][citation:7].
US slashes tariff to 18%
The United States will apply a reciprocal tariff rate of 18% on originating goods of India under the agreement, covering textiles, apparel, leather, footwear, organic chemicals, home décor, artisanal products, and certain machinery [citation:7][citation:10]. Additionally, the US has removed the additional 25% tariff imposed in August 2025 over India's Russian oil purchases, effective February 7, 2026 [citation:2][citation:7].
Subject to finalisation, the US will also remove tariffs on a wide range of Indian goods including generic pharmaceuticals, gems, diamonds, and aircraft parts [citation:2][citation:10].
India opens markets, farmers protected
India will eliminate or reduce tariffs on all U.S. industrial goods and a wide range of U.S. food and agricultural products, including dried distillers' grains (DDGs), red sorghum, tree nuts, fresh and processed fruit, soybean oil, wine and spirits [citation:1][citation:10]. However, Commerce Minister Piyush Goyal emphasised that sensitive agricultural and dairy products adequately produced in India—including maize, wheat, rice, sugar, soybean, and poultry—have been kept outside tariff concessions, ensuring complete protection for farmers' interests [citation:1][citation:5].
Several Indian agricultural exports will now attract zero duty in the United States: spices, tea, coffee, cashew nuts, chestnuts, avocado, banana, mango, kiwi, and papaya [citation:1][citation:5]. This opens vast opportunities for Indian farmers and exporters.
$500 billion purchase intent
The joint statement notes that India "intends to purchase $500 billion of U.S. energy products, aircraft and aircraft parts, precious metals, technology products, and coking coal over the next 5 years" [citation:9][citation:10]. Piyush Goyal clarified that this is an intent, not a binding commitment, based on India's growing import needs [citation:9]. As India's steel capacity expands from 140 mn tonnes to 300 mn tonnes, coking coal imports alone could rise to $30-35 billion annually [citation:9]. Civil aviation requirements (aircraft, engines, spares) are estimated at $80-100 billion over the period [citation:9].
Both nations will significantly increase trade in technology products, including Graphics Processing Units (GPUs) and data centre goods, and expand joint technology cooperation [citation:10].
Non-tariff barriers & digital trade
India will address long-standing non-tariff barriers affecting U.S. medical devices, eliminate restrictive licensing for ICT goods, and work towards accepting U.S. standards for exports [citation:10]. Both countries committed to negotiating digital trade rules addressing discriminatory practices and barriers as part of the broader Bilateral Trade Agreement (BTA) [citation:2][citation:10].
- US tariff cut: Reciprocal tariff reduced from 25% to 18% on Indian goods (textiles, leather, chemicals, machinery) [citation:2][citation:7]
- Russia oil tariff removed: 25% additional duty lifted as India stops Russian oil purchases [citation:2][citation:7]
- Zero-duty access for Indian agri: Spices, tea, coffee, cashew, mango, banana, etc. enter US duty-free [citation:1][citation:5]
- India opens industrial market: Eliminates/reduces tariffs on all US industrial goods [citation:10]
- Farmers protected: Wheat, rice, maize, sugar, dairy, poultry excluded from concessions [citation:1][citation:5]
- $500 billion purchase intent: Energy, aircraft, coking coal, tech products over 5 years (non-binding) [citation:9][citation:10]
- Digital trade & non-tariff barriers: India to address ICT licensing, medical device barriers; negotiate digital rules [citation:2][citation:10]
- BTA roadmap: Further negotiations on IP, services, investment, government procurement [citation:7]
Government & industry reactions
Piyush Goyal: "Fair, equitable, balanced"
Commerce Minister Piyush Goyal described the agreement as fair, equitable and balanced, ensuring complete protection for farmers [citation:1]. He highlighted that India now enjoys lower tariff rates than China, Pakistan, Bangladesh, and Vietnam [citation:1][citation:5]. The deal aims to raise bilateral trade to ₹45 lakh crore in the coming years, benefiting MSMEs, artisans, weavers, and youth [citation:1].
Union ministers hail landmark pact
External Affairs Minister Dr S. Jaishankar said the framework will ensure greater market access and opportunities for Indian exporters, promoting Make in India [citation:6]. Defence Minister Rajnath Singh called it a "strategic milestone" that will expand exports, strengthen labour-intensive sectors, attract investment, and create large-scale employment [citation:6]. Agriculture Minister Shivraj Singh Chouhan emphasised that farmers' interests are of "paramount importance" and have been fully secured [citation:6].
Industry hails move
Exporters and industry bodies welcomed the deal. The reduction in US tariffs makes Indian textiles, leather, and chemicals more competitive. MSMEs engaged in export-oriented sectors are expected to be among the key beneficiaries [citation:1][citation:5].
Tariff comparison: India vs peers
| Country | US Reciprocal Tariff (Post-deal) |
|---|---|
| India | 18% |
| China | 25%+ |
| Pakistan | 25%+ |
| Bangladesh | 25%+ |
| Vietnam | 25%+ |
Path forward: Implementation & BTA negotiations
The United States and India will promptly implement this framework and work towards finalising the Interim Agreement, with a view to concluding a mutually beneficial Bilateral Trade Agreement (BTA) [citation:2][citation:10]. The BTA will address remaining tariff and non-tariff barriers, services, investment, intellectual property, labour, environment, government procurement, and state-owned enterprises [citation:7].
Technical talks and legal scrubbing are underway, with implementation targeted in the coming weeks. India has also committed to negotiate robust digital trade rules within the BTA framework [citation:2].
Key takeaways for businesses & investors
- Exporters gain: Indian textiles, apparel, leather, chemicals, pharmaceuticals, gems & jewellery get 18% US tariff (down from 25%), boosting competitiveness.
- Agri export opportunity: Spices, tea, coffee, fruits (mango, banana, papaya) now enter US duty-free – huge potential for farmers and traders.
- No threat to Indian farmers: Sensitive items (wheat, rice, maize, sugar, dairy, poultry) protected – no tariff concessions given.
- $500 bn intent: Indian companies in energy, aviation, steel (coking coal), and tech can expect smoother US sourcing; not a binding obligation.
- Digital & tech boost: Increased trade in GPUs, data centre goods, and tech cooperation opens avenues for IT and electronics sectors.
- Non-tariff barrier removal: Easier market access for medical devices, ICT goods; standards alignment to reduce compliance costs.
- Make in India push: Greater integration with US supply chains benefits MSMEs, artisans, weavers, and youth employment.
Context: From tariffs to trade reset
The agreement comes after months of reciprocal tariffs imposed by the US in 2025 [citation:7]. On April 2, 2025, President Trump declared a national emergency over the trade deficit and imposed tariffs on India, later raising them to 25% in August 2025 over Russian oil purchases [citation:2][citation:7]. Following India's commitment to stop buying Russian oil, the US agreed to lift the additional 25% tariff and lower the reciprocal rate to 18% [citation:2]. The joint statement of February 6, 2026, formalised the framework [citation:10].
Disclaimer: The analysis and views are for information only. Please consult your advisor before making business or investment decisions.