India and the United States reached a landmark consensus on Friday regarding an interim trade deal framework, marking a significant step toward deepening bilateral economic ties. The agreement aims to reduce tariffs, strengthen energy relations, and foster closer cooperation across various sectors. This development occurs as both nations seek to restructure global supply chains and enhance trade resilience. Commerce Minister Piyush Goyal highlighted key aspects of this framework, emphasizing its potential to transform the national economy by providing greater access to the world's largest market.
The Roadmap to a Comprehensive Bilateral Trade Agreement
The interim framework is part of ongoing negotiations directed toward a comprehensive India-US Bilateral Trade Agreement (BTA), expected to commence in February 2025. Officials have described this agreement as a move toward reciprocal, balanced trade and enhanced supply chain security. The deal is being viewed as a strategic alignment between the world's largest economy and its fastest-growing major market, while by establishing clear rules and shared objectives, both nations aim to create a more predictable and transparent environment for businesses and exporters on both sides.
India's Commitments to Tariff Reductions
Under the terms of the framework, India has committed to significant tariff concessions. This includes the elimination or reduction of tariffs on all US industrial goods. On top of that, India will cut duties on a wide range of US agricultural and food products, such as Dried Distillers Grains (DDG), red sorghum for animal feed, nuts, fruits, soybean oil, wine, and spirits. India has also agreed to provide preferential market access in agreed sectors to promote smoother trade flows, which is expected to benefit US exporters looking to expand their footprint in the Indian subcontinent.
Reciprocal Tariffs and Market Access for Indian Goods
The United States will apply an 18% reciprocal tariff on most Indian goods, including textiles, apparel, leather, footwear, plastics, rubber, organic chemicals, home decor, handicraft products, and certain machinery. However, the framework outlines a path for the removal of these reciprocal tariffs on a wider chain of Indian goods, such as generic pharmaceuticals, gems and diamonds, and aircraft parts, following the successful implementation of the interim agreement. This phased approach is designed to ensure that both nations meet their commitments while gradually opening up markets.
Resolution of Section 232 Duties and Non-Tariff Barriers
A critical component of the framework involves addressing duties linked to US national security regulations. Certain duties imposed under Section 232 on Indian aircraft and aircraft parts related to steel, aluminum, and copper will be removed. On top of that, India will receive a preferential tariff rate quota for auto parts. Both countries have also resolved to review long-standing non-tariff barriers affecting imports, particularly in medical devices, Information and Communication Technology (ICT) products, and agricultural goods. Within six months, both parties intend to discuss standards and conformity assessment procedures to simplify trade.
Supply Chain Resilience and $500 Billion Purchase Commitment
In a major move to balance trade, India has committed to purchasing $500 billion worth of US goods over the next five years. This commitment includes energy products, aircraft and parts, precious metals, technology products, and coking coal. The deal also aims to expand technology trade, including Graphics Processing Units (GPUs) and data center equipment. According to trade analysts, this framework underscores cooperation on economic security, supply chain resilience, and measures to counter non-market policies of third countries. The interim framework will be implemented shortly as both nations continue negotiations toward the final BTA.