India-US trade deal | From 18% tariffs to $500 billion purchase plan: Key takeaways

After one year of heightened tensions, negotiations and navigating a hostile economic terrain, the United States and India have agreed on a framework for an Interim Trade Agreement which will lower tariffs, boost economic cooperation and reshape energy ties.

Though trade talks began way back in February 2025, today's announcement is a framework that reaffirms a ‌commitment to negotiations toward a broader bilateral trade agreement.

Here are the key takeaways

Elimination of tariffs on US products

India will eliminate or cut down import duties on all US industrial goods and a wide range of American food and agricultural products, including dried distillers' grains, red sorghum for animal feed, tree nuts, fresh and processed fruit, soybean oil, wine and spirits.

India's purchase commitments

India intends to purchase $500 billion of US energy products, aircraft and aircraft parts, precious metals, technology products, and coking coal over the next 5 years.

Reduction in tariffs and a commitment to stop buying Russian oil

United States will apply a tariff rate of 18 per cent Indian imports to the US on products like textiles and apparel, leather and footwear, plastic and rubber, organic chemicals, home decor, artisanal products and certain machinery.

India will get the same ‌tariff relief granted to other allied countries that have signed trade deals with the United States on certain aircraft and aircraft parts, and will receive a quota for auto parts imports that will be subject to a lower tariff rate.

If the Interim Agreement comes to fruition, tariffs will also be removed on generic pharmaceuticals, gems and diamonds along with aircraft parts as part of US' Potential Tariff Adjustments for Aligned Partners.

Earlier, the Trump-led administration had a slapped a heavy tariff of 25 per cent on Indian imports. In August last year, US slapped another 25 per cent tariff on India for importing Russian oil, taking the total amount to 50 per cent.

With the tariff being lowered now, the US said that India has committed to stopping, directly or indirectly, importing Russian oil.

Preferential market access

Both countries agreed to provide each other sustained preferential market access in sectors of respective interest on a sustained basis.

Non-tariff barriers 

India also agreed to address longstanding non-tariff barriers on imports of agriculture products, medical devices and communications gear, with negotiations to be completed within six months on an agreement to accept US or international safety and licensing standards for product imports.

The US affirmed that it intends to consider India's requests for lower tariffs on Indian goods during further negotiations of the bilateral trade agreement. The two sides also agreed to cooperate on enforcement of export controls on sensitive technologies ​and take actions to address "non-market policies of third parties," a reference ‌to China.

Steel, aluminum, auto parts

United States will remove certain Section 232 tariffs on Indian aircraft and aircraft parts tied to steel, aluminum and copper measures.

Make in India, USD 30 trillion market

On the development, Prime Minister Narendra Modi said the interim trade pact will strengthen 'Make in India' by opening up new opportunities for farmers and entrepreneurs, and create jobs for women and youngsters.

Commerce and Industry Minister Piyush Goyal said the interim pact will open a USD 30 trillion market for Indian exporters, especially MSMEs, farmers and fishermen, as the US duties on Indian goods will come down to 18 per cent from 50 per cent earlier.

Digital trade

Both countries committed to address discriminatory or burdensome digital trade practices and work towards digital trade rules under the full Bilateral Trade Agreement.