What Happened
- Under the India-US interim bilateral trade framework announced on 7 February 2026, India agreed to reduce or eliminate import duties on several US agricultural and food products including soybean oil, tree nuts, fresh and processed fruits, wine and spirits, cranberries, and blueberries.
- The tariff reduction structure is not uniform: it includes immediate duty elimination, phased elimination (over up to 10 years), margin of preference, and tariff rate quotas (TRQs) for highly sensitive items.
- Pre-deal tariff rates were significant: tree nuts (almonds, walnuts, pistachios) faced 30-50% duties, fresh and processed fruits faced 30-40% duties, and wine and spirits faced effective border duties of 50% or higher (excluding state-level taxes). Soybean oil attracted ~27.5% duty on crude forms and ~36% on refined variants.
- In return, the US reduced its reciprocal tariff on Indian goods from 25% to 18%, putting India at an advantage over competitors like China (35%), Bangladesh and Vietnam (20%).
- India introduced 44 new tariff lines in the Union Budget 2026-27 to track imports of products for which meaningful US market access has been granted.
Static Topic Bridges
Tariff Rate Quotas as a Trade Policy Tool
A Tariff Rate Quota (TRQ) is a trade policy instrument that applies a lower tariff rate to imports within a specified quantity (the quota) and a higher tariff rate to imports exceeding that quantity. TRQs are widely used in WTO-governed agricultural trade to balance market access commitments with domestic producer protection.
- TRQs consist of two components: an in-quota tariff (lower rate) and an over-quota tariff (higher, often prohibitive rate)
- WTO Agreement on Agriculture (AoA) encourages the use of TRQs as a tariffication tool to replace non-tariff barriers
- India uses TRQs selectively in its trade agreements to protect sensitive agricultural commodities while providing limited market access
- TRQs allow gradual market opening without exposing domestic producers to unlimited competition
Connection to this news: The India-US interim deal applies TRQs specifically to in-shell almonds, walnuts, pistachios, and lentils, allowing limited quantities at reduced duties rather than fully eliminating tariffs. This approach lets India provide meaningful market access to the US while capping the volume of imports that could displace domestic production.
India's Wine and Spirits Market and Trade Barriers
India is one of the fastest-growing alcoholic beverage markets globally but imposes some of the highest trade barriers on wine and spirits imports. The effective tax on imported wine and spirits in India often exceeds 150% when combining basic customs duty, additional duties, and state-level excise and VAT. India's wine production is concentrated in Maharashtra (primarily Nashik district) and Karnataka.
- Import duty on wine before the deal: approximately 50% basic customs duty plus additional duties
- India's domestic wine industry produces roughly 25 million litres annually, concentrated in Maharashtra's Nashik and Pune districts
- Major wine-exporting countries to India: France, Italy, Australia, Chile
- States regulate alcohol independently under the Constitution (State List, Entry 8), adding another layer of taxation
- Wine and spirits trade has been a persistent US grievance in bilateral trade talks for over a decade
Connection to this news: The tariff reduction on US wine and spirits addresses a long-standing US trade demand. However, the impact may be moderated by state-level excise duties that remain outside federal trade deal jurisdiction, meaning actual retail price reductions will vary significantly across states.
India-US Trade Balance and Reciprocal Tariff Architecture
The US has applied a policy of "reciprocal tariffs" under the Trump administration, calibrating tariff rates on each trading partner based on the bilateral trade deficit and perceived tariff asymmetry. India's average applied tariff on US goods was significantly higher than the US tariff on Indian goods, which became a central point of contention.
- India-US goods trade deficit (US perspective) in 2024: $45.8 billion
- Total bilateral goods trade in 2024: $128.9 billion
- US services trade surplus with India in 2024: $102 million (nearly balanced)
- Pre-deal US reciprocal tariff on India: 25%; post-deal: 18%
- Comparative post-deal US reciprocal tariffs: China 35%, Bangladesh 20%, Vietnam 20%, India 18%
- India's average applied MFN tariff (all goods): approximately 17-18%
Connection to this news: The reduction in US reciprocal tariffs from 25% to 18% provides Indian exporters (particularly in textiles, leather, footwear, organic chemicals, and machinery) a competitive edge over rivals from China, Bangladesh, and Vietnam in the US market, partially offsetting India's agricultural tariff concessions.
Key Facts & Data
- Pre-deal Indian tariffs: soybean oil ~27.5% (crude), ~36% (refined); tree nuts 30-50%; fruits 30-40%; wine/spirits 50%+
- US reciprocal tariff on India: reduced from 25% to 18%
- 44 new tariff lines created in Union Budget 2026-27 for tracking US market access products
- TRQ mechanism applied to: in-shell almonds, walnuts, pistachios, lentils
- Tariff reduction phasing: immediate elimination, phased over up to 10 years, margin of preference, or TRQ
- India's WTO-bound agricultural tariff ceiling: ~113.5% (applied rates remain well below)
- India committed to $500 billion in US purchases (energy, technology, aircraft, precious metals, coal) over five years
- India's competitive advantage: 18% US tariff vs. China (35%), Bangladesh/Vietnam (20%)