India, US release joint statement for interim trade deal

New Delhi: India and the United States on Saturday released a joint statement for the interim trade deal, which is expected to be formally signed in the coming weeks.

Under the deal, both sides have agreed to lower tariffs and non-tariff barriers to boost trade. US President Donald Trump signed an executive order to revoke 25 per cent penal tariff, which was imposed for India’s purchase of Russian oil. This so-called penal tariff is removed with effect from 12:01 am Eastern Time on Saturday.

The Trump administration has also agreed to cut the "reciprocal" levies on the majority of Indian products from 25 per cent to 18 per cent.

Indian goods which will attract a lower 18 per cent tariff in the US market include textiles, apparel, leather, footwear, plastics, rubber, organic chemicals, home décor, artisanal products, and certain machinery.

The US has also agreed to provide a preferential tariff-rate quota for Indian auto parts and remove the tariffs on Indian aircraft and aircraft parts related to steel, aluminium, and copper.

“India will eliminate or reduce tariffs on all US industrial goods and a wide range of US food and agricultural products, including dried distillers’ grains (DDGs), red sorghum for animal feed, tree nuts, fresh and processed fruit, soybean oil, wine and spirits, and additional products,” reads the joint statement.

Commerce and Industry Minister Piyush Goyal said the deal will not hurt the interests of Indian farmers, MSMEs and artisans.

“Products made by our farmers, including spices, tea, coffee, coconut, cashew, mango, banana, guava, pineapple, and processed items like jams and juices, will now face zero reciprocal tariff in the United States,” Goyal told reporters.

“Sensitive commodities like rice, wheat, sugar, millets, and pulses remain fully protected,” he added.

The joint statement noted that “India intends to purchase Rs 45,28,822 crore ($500 billion) of US energy products, aircraft and aircraft parts, precious metals, technology products, and coking coal over the next 5 years.”

“India and the United States will significantly increase trade in technology products, including Graphics Processing Units (GPUs) and other goods used in data centers, and expand joint technology cooperation,” it said.

While Prime Minister Narendra Modi government celebrated the deal saying it would open new opportunities for Indian farmers, artisans, and manufacturers, trade experts striked cautionary note.

“India’s interim trade deal with the United States offers some relief on tariffs, but a closer reading suggests an uneven exchange,” said Global Trade Research Initiative (GTRI) founder Ajay Srivastava.

“Washington has relaxed punitive reciprocal tariffs—cutting them from 50 per cent to 18 per cent on about 55 per cent of Indian exports—without reducing its MFN tariffs at all. In return, India has agreed to reduce or eliminate MFN tariffs on all US industrial goods and a wide range of agricultural products, including fruits, soybean oil, wine and spirits—sectors that are politically sensitive and likely to hurt Indian farmers,” Srivastava noted.

Taken together, while the US has eased tariffs, it has secured far-reaching commitments from India on agriculture, regulation, digital policy, security alignment, and large-scale purchasing—concessions that go well beyond trade, he added.

“It is important to understand that India has a Rs 3,71,363 crore ($41 billion) export surplus in trade with the US. This may come down as we import more energy, defense and aviation-related goods and high technology stuff from the US," said V K Vijayakumar, Chief Investment Strategist, Geojit Investments Limited.

Engineering Export Promotion Council (EEPC) India Chairman Pankaj Chadha the US-India joint statement has boosted the confidence of the Indian engineering sector.

"A deeper trade partnership with the US bodes well for both sides. Once an interim deal is signed and a comprehensive agreement follows, the Indian engineering sector could see much stronger export growth. It will significantly contribute towards achieving the engineering exports target of US$250 billion by 2030," Chadha said.