U.S.–India Reach Interim Trade Framework, Resetting the Terms of Economic Alignment

The United States and India have reached a framework for an Interim Trade Agreement, marking the next step in the broader U.S.–India Bilateral Trade Agreement (BTA) negotiations launched in February 2025 by President Donald J. Trump and Prime Minister Narendra Modi.

While not yet a final deal, the framework sets out reciprocal tariff adjustments, sector-specific market access, and supply-chain coordination that both governments describe as a milestone toward a more “balanced” and strategically aligned trade relationship.

What Was Agreed — And What Was Deferred

At the core of the interim framework is a recalibration of tariffs on both sides.

India has committed to eliminating or reducing tariffs across all U.S. industrial goods and a broad range of agricultural and food products. These include animal feed inputs such as dried distillers’ grains and sorghum, as well as tree nuts, fruits, soybean oil, wine, spirits, and other processed products — areas where U.S. exporters have long faced access barriers.

The United States, for its part, will apply a reciprocal tariff rate of 18 percent on Indian goods under existing executive authorities, covering sectors such as textiles and apparel, leather goods, plastics, organic chemicals, home décor, artisanal products, and certain machinery. However, the framework also lays out a pathway for tariff removal on a wide range of Indian exports — including generic pharmaceuticals, gems and diamonds, and aircraft parts — contingent on the successful conclusion of the Interim Agreement and progress toward the full BTA.

"National Security Tariffs", Selectively Rolled Back

A notable element of the framework is the partial rollback of tariffs imposed "on national security grounds" in recent years.

The United States will remove tariffs on certain Indian aircraft and aircraft parts originally imposed under steel, aluminum, and copper import proclamations. In parallel, India will receive a preferential tariff-rate quota for automotive parts subject to U.S. Section 232 restrictions.

Pharmaceuticals remain an open file. Any final treatment of Indian generic drugs and pharmaceutical ingredients will depend on the outcome of an ongoing U.S. Section 232 investigation, signaling that health-sector trade remains politically and strategically sensitive.

Non-Tariff Barriers: India Signals Movement

Beyond tariffs, the framework directly addresses long-standing non-tariff barriers that have complicated bilateral trade.

India has agreed to take steps to:

• Ease regulatory and licensing hurdles affecting U.S. medical devices

• Eliminate restrictive import licensing for U.S. information and communications technology goods

• Review — within six months — whether U.S. or international standards and testing requirements can be accepted for American exports in specified sectors

• Address persistent barriers to U.S. agricultural and food exports

Both sides also committed to discussions on standards, conformity assessments, and technical regulations to reduce compliance friction across agreed sectors.

Rules of Origin and Safeguards

To prevent trade diversion, the agreement will establish rules of origin designed to ensure that benefits accrue primarily to U.S. and Indian producers, rather than third-country intermediaries.

The framework also includes a safeguard clause allowing either country to adjust its commitments if the other alters agreed tariff levels — a provision reflecting the political volatility surrounding trade policy in both capitals.

Strategic Alignment Beyond Tariffs

The agreement extends well beyond traditional trade mechanics.

The United States and India committed to deeper coordination on economic security, supply-chain resilience, export controls, and investment screening — explicitly referencing concerns over non-market policies of third countries. This signals a growing convergence between trade policy and geopolitical strategy.

India also indicated its intent to purchase $500 billion in U.S. goods over the next five years, spanning energy products, aircraft and aircraft parts, precious metals, technology products, and coking coal. Both countries plan to expand trade and cooperation in advanced technologies, including GPUs and data-center-related infrastructure.

Digital trade is another unresolved but central pillar. The framework commits both governments to address discriminatory or burdensome digital trade practices and to establish a pathway toward comprehensive digital trade rules within the eventual BTA.

What This Really Signals

This interim framework does not resolve the most politically sensitive trade disputes between the United States and India. But it does reset the negotiating baseline.

Rather than a sweeping free-trade agreement, the approach reflects a selective, security-aware model: tariff relief paired with conditionality, market access tied to regulatory reform, and trade policy explicitly linked to supply-chain resilience and geopolitical alignment.

Whether the framework matures into a full Bilateral Trade Agreement will depend on follow-through — particularly on pharmaceuticals, digital trade, and India’s non-tariff barriers.

For now, the signal is clear: Washington and New Delhi are betting that managed reciprocity, not blanket liberalization, is the future of their economic partnership.