Tariff war is over! Indian goods will be cheaper in America, discussion on dairy and agri sector here

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PM Narendra Modi and Donald Trump

India and the United States on Friday took a significant step forward by announcing the framework for an India-US trade agreement that aims to reduce tariffs, strengthen energy ties and boost economic cooperation. The joint statement of the two governments confirmed that although the framework paves a clear path forward, further negotiations will be required to finalize a comprehensive bilateral trade agreement.

Tariff reduced

US President Donald Trump had announced earlier this week that under the India-US trade agreement, the US will reduce the tariff on Indian goods from 50% to 18%. In return, India will have to stop purchasing Russian oil and reduce trade barriers. Half of the 50 percent tariff was imposed as a measure against India’s Russian oil imports, which Trump said were supporting Moscow’s war efforts in Ukraine. On Friday, Trump signed an executive order removing 25 percent of the tariffs. India has agreed to import oil from America and Venezuela.

Highlights of India-US deal

The India-US deal includes specific trade commitments. India has agreed to buy $500 billion worth of American goods over the next five years, including oil, gas, coking coal, aircraft and aircraft parts, precious metals and technology products such as graphics processing units used for AI and other data centers applications. India will reduce or eliminate duties on a range of US industrial and agricultural products, including dry grains, red sorghum, nuts, fresh and processed fruit, soybean oil, wine and spirits.

18 percent tariff will remain applicable on major American imports

Under the India-US trade agreement, the US will maintain 18 per cent tariff on most goods imported from India, including textiles, apparel, leather, footwear, plastics, organic chemicals, home furnishings, handicrafts and some machinery. India will get tariff exemption on some aircraft and aircraft parts, as well as a lower tariff quota for import of auto components. Negotiations regarding generic drugs and their components will be done on the basis of the ongoing tariff investigation by the US.

Opportunities for Indian business

Indian Trade Minister Piyush Goyal welcomed the India-US Framework on X, calling it open access for Indian exporters to the $30 trillion US market, which will particularly benefit farmers, fishermen and MSMEs. Goyal said a formal trade agreement could be signed by March, after which India’s tariff cuts on US exports would become effective.

Non-tariff barriers and standards

India also agreed to remove long-standing non-tariff barriers on agricultural products, medical equipment and communication equipment. The two countries aim to finalize within six months an agreement recognizing American or international safety and licensing standards for imported products. The US confirmed that it will consider India’s requests for lower tariffs in future negotiations. Both sides committed to cooperate in the enforcement of export controls on sensitive technologies and to address “third party non-market policies” in the context of China.

Importance of India-US trade deal

Challenges have emerged in negotiating a full trade agreement on issues such as agriculture, digital trade, medical devices and market access. Officials said strategic concerns including competition from China, supply chain diversification and energy security have further increased the need for an India-US trade agreement.

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