Balancing strategic alignment with economic nationalism

India and the US have reached a framework for an interim trade agreement (often referred to as an interim or mini trade pact), announced on Saturday.

- Harsh V Pant

This builds on negotiations launched in February 2025 between US President Donald Trump and Prime Minister Narendra Modi, serving as a stepping stone toward a fuller bilateral trade agreement (BTA).

The US will apply a reciprocal tariff rate of 18% on a range of Indian-origin goods (down from 50% that included the now-removed additional 25% penalty tariff linked to India’s Russian oil purchases). This covers sectors like textiles and apparel, leather and footwear, plastics and rubber products, organic chemicals, home decor, artisanal products, and certain machinery. The US will not only remove tariffs on additional Indian exports, including generic pharmaceuticals, gems and diamonds, and aircraft parts but also certain national security-related tariffs on Indian aircraft and parts.

India will eliminate or significantly reduce tariffs on all US industrial goods and a wide range of US food] agricultural products, such as dried distillers’ grains (DDGs), red sorghum for animal feed, tree nuts, fresh/processed fruits, soybean oil, wine and spirits. India has also agreed to address non-tariff barriers affecting US agricultural exports and discuss alignment on standardsjconformity assessments in key sectors. The framework includes India’s intention to purchase $500 billion worth of US goods over the next five years, focusing on energy products, aircraft and parts, precious metals, technology products (e.g., GPUs for data centres), and coking coal.