New Era in US-India Trade: Key Highlights of the 2026 Interim Agreement Framework
February 7, 2026
The United States and India have officially announced a framework for an Interim Agreement regarding reciprocal and mutually beneficial trade. This development, announced today, serves as a significant stepping stone toward a broader Bilateral Trade Agreement (BTA) and aims to fortify supply chains while enhancing market access for both nations.
Here is a breakdown of the critical components of the framework:
1. Tariff Reductions and Market Access
The agreement outlines major tariff adjustments intended to balance trade interests:
- US Market Access for India: The United States will remove tariffs on Indian steel, aluminum, and copper that were previously imposed under national security proclamations. Additionally, India will receive a preferential tariff rate quota for automotive parts, subject to specific US national security requirements.
- India Market Access for US: India has committed to eliminating or reducing tariffs on all US industrial goods and a wide range of agricultural products. Specific agricultural items slated for tariff reduction include dried distillers’ grains (DDGs), red sorghum, tree nuts, fresh and processed fruits, soybean oil, wine, and spirits.
2. The “Reciprocal Tariff” Mechanism
A key feature of this framework is the application of a reciprocal tariff rate:
- 18% Tariff Implementation: The US will apply a reciprocal tariff rate of 18% on originating goods from India, covering sectors such as textiles, apparel, leather, footwear, plastics, organic chemicals, and home décor.
- Conditions for Removal: Subject to the successful conclusion of the Interim Agreement, the US will remove this reciprocal tariff on a wide range of goods, including generic pharmaceuticals, gems, diamonds, and aircraft parts.
3. Strategic Procurement and Technology Cooperation
The framework emphasizes deep economic alignment and large-scale procurement:
- $500 Billion Commitment: India intends to purchase $500 billion worth of US energy products, aircraft, precious metals, technology products, and coking coal over the next five years.
- Technology & Digital Trade: Both nations will significantly increase trade in technology products, specifically Graphics Processing Units (GPUs) and goods used in data centers. The agreement also aims to address barriers to digital trade.
4. Addressing Non-Tariff Barriers
Significant focus is placed on regulatory ease and standards:
- Medical Devices & ICT: India has agreed to address long-standing barriers in the trade of US medical devices and eliminate restrictive import licensing procedures for US Information and Communication Technology (ICT) goods.
- Standards Recognition: Within six months of the agreement’s entry into force, India will determine whether US-developed or international standards are acceptable for US exports in identified sectors