US hopes to clinch trade deal soon but India wants tariff clarity

What Happened

• The United States has expressed confidence in concluding an interim bilateral trade agreement with India in the near term, but India has signalled it needs greater clarity on the final tariff structure before signing any deal.
• The two countries are engaged in Phase 1 negotiations under the US-India Bilateral Trade Agreement (BTA) framework, launched by the two leaders on 13 February 2025.
• A key framework agreement was struck in early February 2026: the US reduced its reciprocal tariff on Indian goods from 25% to 18%, and separately removed an additional 25% tariff on Indian imports in recognition of India reducing reliance on Russian oil.
• India has committed in principle to eliminating or reducing tariffs on all US industrial goods and a range of agricultural products (dried distillers' grains, sorghum, tree nuts, soybean oil, wine, and spirits), while also addressing non-tariff barriers on US medical devices and ICT goods.
• India has pledged to purchase USD 500 billion worth of US energy, aircraft, precious metals, technology products, and coking coal over five years.
• India's negotiators are seeking a clear schedule specifying which product categories will attract the residual 18% tariff versus the zero-tariff basket — the ambiguity on this point is the principal bottleneck holding back conclusion of the interim deal.
• Fresh talks resumed in Washington as both sides aim to finalise the deal ahead of the broader BTA's full conclusion.

Static Topic Bridges

US Reciprocal Tariff Framework and India

In 2025, the US administration introduced a sweeping "reciprocal tariff" policy, arguing that the US had long faced asymmetric trade barriers. India, with a weighted average applied tariff of approximately 12%, was initially hit with a 25% reciprocal tariff under this framework. India's Generalised System of Preferences (GSP) privileges — which had allowed duty-free access to the US market for approximately USD 5.6 billion worth of Indian exports — had already been revoked in March 2019 following a bilateral dispute. The February 2026 interim framework represents the first major rollback of these tariffs, reducing the headline rate to 18% and creating a negotiating pathway toward further reduction.

Trade in Goods vs. Trade in Services: India's Structural Calculus

India's trade relationship with the US is asymmetric in important ways. India runs a goods trade surplus of approximately USD 35 billion with the US, making it a target for tariff action. However, India is simultaneously the world's largest exporter of IT and business process services, where the US is India's single largest market. Any goods-for-services trade-off — where India concedes tariff reductions on goods to protect services market access — is structurally complex. The H-1B visa regime, which facilitates Indian IT professional mobility to the US, sits outside trade agreement scope but is an informal bargaining chip. India's negotiating caution on tariff clarity also reflects domestic sensitivities: agricultural concessions (on soybean oil, wine, spirits) face opposition from farmer lobbies, and pharmaceutical pricing concerns complicate medical device market access commitments.

World Trade Organization (WTO) and Bilateral Trade Agreements

The WTO's Most Favoured Nation (MFN) principle — codified under Article I of the General Agreement on Tariffs and Trade (GATT) — requires that any trade advantage granted to one member be extended to all members. Bilateral Free Trade Agreements (FTAs) and Comprehensive Economic Partnership Agreements (CEPAs) are permitted as exceptions under GATT Article XXIV, provided they cover "substantially all trade" between the parties. The US-India BTA negotiations operate in this legal space. Unlike FTAs, which focus on tariff elimination, the US-India BTA is designed as a broader agreement covering investment, digital trade, intellectual property, government procurement, and labour standards — reflecting the US "21st century trade deal" template.

Key Facts & Data

• US-India BTA negotiations launched: 13 February 2025
• Interim framework announced: February 2026
• US reciprocal tariff on India: reduced from 25% to 18%
• India's committed US purchases: USD 500 billion over 5 years (energy, aircraft, metals, tech, coking coal)
• India-US bilateral goods trade (2025): approximately USD 120 billion
• India's goods trade surplus with US: approximately USD 35 billion
• India's GSP exports to the US (before 2019 revocation): approximately USD 5.6 billion
• Agricultural concessions under negotiation: dried distillers' grains, sorghum, tree nuts, soybean oil, wine, spirits
• Additional 25% tariff on Indian imports (linked to Russian oil): removed under interim framework