What Happened
- In late February 2026, India and the US rescheduled chief negotiator-level talks originally planned for February 23, on the sidelines of diplomatic developments around the interim bilateral trade agreement.
- The rescheduling came after a February 6, 2026 joint statement between President Trump and Prime Minister Modi announcing a framework for an interim trade agreement — but subsequent details exposed significant gaps between the two sides.
- A White House fact sheet released February 9 included "certain pulses" in the list of products India would reduce tariffs on — a politically sensitive concession India had not agreed to; India's negotiators secured a revision, with "committed" changed to "intends" by February 11.
- A reference to India removing its Digital Services Tax (DST) was also removed from the revised fact sheet under India's pushback.
- The agreed framework involves the US reducing reciprocal tariffs from 25% to 18% on key Indian exports including textiles, apparel, leather, footwear, and chemicals — effective February 7, 2026.
Static Topic Bridges
India-US Bilateral Trade — Structure and Tensions
India and the United States are among each other's largest trading partners, with bilateral trade in goods and services exceeding $190 billion in FY2024-25. However, the trade relationship has long been characterised by asymmetries: the US runs a persistent goods trade deficit with India (approximately $45-47 billion in 2024), which has been a source of American frustration. India maintains high tariffs on several categories — average Most Favoured Nation (MFN) applied tariff of ~17%, compared to the US's ~3.4% — making it one of the more protected large economies. Key friction points include Indian tariffs on US agricultural products, US concerns about India's Digital Services Tax (which primarily affects American tech companies like Google, Meta, Amazon), and India's restrictive data localisation requirements.
- Bilateral goods + services trade: ~$190 billion+ (FY2024-25)
- US goods trade deficit with India: ~$45-47 billion (2024)
- India's average MFN applied tariff: ~17% (goods)
- US average MFN applied tariff: ~3.4%
- India's Digital Services Tax: 6% equalisation levy on digital advertising; 2% on e-commerce operators (non-resident)
- India's GSP (Generalised System of Preferences): US terminated India's GSP benefits in June 2019 under Trump's first term; restoration was a key Indian ask
- US reciprocal tariff on India (post-Feb 7, 2026): 18% (reduced from 25%)
Connection to this news: The rescheduling of negotiator talks reflects the complexity of bridging these structural asymmetries within a framework agreement; the pulses and DST controversies illustrate how domestic political sensitivities constrain negotiating flexibility on both sides.
Generalised System of Preferences (GSP) — India's Key Demand
The Generalised System of Preferences is a US trade programme that allows duty-free imports from designated developing countries on specified products. India was the largest beneficiary of US GSP, with approximately $6.3 billion worth of exports entering the US duty-free annually before GSP was revoked in June 2019. The revocation — announced under Trump's first term on grounds that India had failed to provide "equitable and reasonable access" to its markets — was a major bilateral irritant. Restoring GSP (or a successor arrangement) is India's primary offensive interest in the trade negotiations, as it would directly benefit labour-intensive sectors like textiles, gems and jewellery, leather goods, and chemicals.
- GSP revocation date: June 5, 2019 (effective)
- Value of India's GSP exports before revocation: ~$6.3 billion/year
- Primary beneficiary sectors: Engineering goods, chemicals, textiles, leather, gems and jewellery
- GSP renewal requirement: Congressional action (US Trade Act, 1974 governs GSP); executive cannot restore unilaterally
- Countries with GSP: Over 100 developing nations benefited under the US GSP programme
- Alternative: Section 301 tariff exclusions or MFN tariff reductions can partially substitute
Connection to this news: The interim trade deal framework announced February 6 reportedly included potential GSP restoration or an equivalent tariff relief mechanism as part of the broader reciprocal tariff reduction — this is a central Indian interest that drove engagement despite the rescheduling.
India's Digital Services Tax (DST) and WTO/US Trade Friction
India's Digital Services Tax operates through two mechanisms: a 6% equalisation levy on online advertising services provided by non-resident platforms (enacted 2016), and a 2% equalisation levy on non-resident e-commerce operators with Indian revenues above Rs 2 crore (enacted 2020, later removed in Budget 2024 for e-commerce). The US Trade Representative (USTR) conducted a Section 301 investigation into India's DST in 2021, finding it discriminatory against US companies (Google, Facebook/Meta, Amazon, Netflix are primary payers). The USTR recommended retaliatory tariffs of 25% on $55 million worth of Indian imports but suspended them pending OECD-led global agreement on digital taxation (the Pillar 1/Pillar 2 framework under the Two-Pillar Solution). India removed the 2% e-commerce levy in Budget 2024 as a gesture; the 6% advertising levy remains.
- 6% equalisation levy: On online advertising; primarily affects Google, Meta; enacted Finance Act 2016
- 2% e-commerce levy: On non-resident e-commerce operators; enacted Finance Act 2020; removed in Budget 2024
- USTR Section 301 finding (2021): DST discriminates against US digital companies
- OECD Pillar 1: Reallocates taxing rights to market jurisdictions; India's DST is to be withdrawn upon Pillar 1 implementation
- OECD Pillar 2: Global minimum tax of 15% on MNC profits; India aligning domestic law
- US demand: Full withdrawal of DST as precondition for comprehensive trade deal
Connection to this news: The initial inclusion of DST removal in the February 9 White House fact sheet — and India's successful pushback — illustrates this as the most contentious unresolved issue; its removal from the revised fact sheet signals it has been deferred to the comprehensive BTA, not the interim deal.
India-US Trade Engagement Framework: From BTA to Interim Deal
The broader framework for India-US trade engagement involves three nested levels: the Bilateral Trade Agreement (BTA) being negotiated as a comprehensive FTA; the interim deal as a subset of BTA provisions that can be agreed and implemented quickly; and sector-specific arrangements (defence, technology, agriculture) negotiated in parallel. The interim deal structure emerged from the February 2026 Modi-Trump call and aims to provide immediate tariff relief on a defined product set, while BTA negotiations on more complex issues (agriculture, services, intellectual property, data, digital trade) continue. The US-India Trade Policy Forum (TPF) and the US-India CEO Forum are the institutional mechanisms for the business community track, complementing government-to-government negotiations.
- Interim deal: Signed/framework announced February 6, 2026; tariff reduction on textiles, chemicals, leather, footwear (25% → 18%)
- Comprehensive BTA: Under negotiation; expected to cover agriculture, services, digital, IP
- Chief Negotiator level: The rescheduled talks were at this level — senior officials just below ministerial
- US-India Trade Policy Forum: Ministerial-level bilateral trade dialogue mechanism (established 2005)
- India-US DOGE-type commitment: Trump linked tariff removal to India stopping Russian oil purchases (part of the deal package)
- India's position on Russian oil: Did not formally agree; US EO issued removing 25% tariff "in recognition of India's commitment"
Key Facts & Data
- Bilateral trade (goods + services): ~$190 billion+ (FY2024-25)
- US goods trade deficit with India: ~$45-47 billion (2024)
- India's average MFN applied tariff: ~17% (vs US ~3.4%)
- India's GSP exports before 2019 revocation: ~$6.3 billion/year
- GSP revoked: June 5, 2019 (Trump first term)
- US reciprocal tariff on India: Reduced from 25% to 18% (effective February 7, 2026)
- Products covered by tariff reduction: Textiles, apparel, leather, footwear, plastics, rubber, organic chemicals, certain machinery
- India's 6% equalisation levy (digital advertising): Remains in force
- 2% e-commerce levy: Removed in Budget 2024
- Framework announced: February 6, 2026 (post-Modi-Trump call)
- Pulses controversy: Removed from fact sheet by February 11, 2026