India and the United States have taken a significant step to enhance bilateral trade by agreeing to lower tariffs on key products, ranging from pharmaceuticals to aircraft parts. This interim trade framework sets the stage for a larger Bilateral Trade Agreement (BTA) in the future.
As part of a framework for an interim trade agreement, the United States and India have agreed to lower tariffs on pharmaceuticals, diamonds, industrial commodities, agricultural products, and aircraft parts.
Interim Trade Agreement Details
On February 7, the two parties jointly unveiled the framework, which includes promises for an interim agreement that would reduce reciprocal duties on Indian exports to 18 percent.
Additionally, it restates intentions to negotiate a more comprehensive bilateral trade deal that would incorporate more offers of market access.
Reciprocal Tariff Reductions
India-sourced items, such as textiles and clothing, leather and footwear, plastic and rubber, organic chemicals, home décor, artisanal goods, and some machinery, will be subject to a reciprocal tariff rate of 18 percent in the United States. There will be an executive order to implement this adjustment.
All American industrial items as well as a variety of US food and agricultural products, such as dry distillers’ grains, red sorghum for animal feed, tree nuts, fresh and processed fruits, soybean oil, wine, and spirits, will have their tariffs eliminated or reduced by India under the framework.
Addressing Non-Tariff Barriers
India also committed to removing long-standing non-tariff trade restrictions that impact US exports, such as those pertaining to US agricultural products, medical equipment, and IT items.
Subject to the interim agreement’s successful conclusion, the United States will reciprocate by removing duties on important Indian exports, such as jewels and diamonds, generic medications, and aircraft and aircraft parts.
Additional US Provisions
Additionally, Washington has accepted giving India favorable tariff-rate quotas for auto parts and lifting some national security-related duties on Indian aircraft and aviation parts imposed under steel, aluminum, and copper trade restrictions.
The results of a current US Section 232 investigation will determine further negotiated outcomes for Indian pharmaceutical ingredients.
The announcement stated that “the United States and India would expeditiously execute this framework and endeavor to finalize the Interim Agreement with a view to concluding a mutually advantageous BTA accordance with the roadmap outlined in the Terms of Reference.”
Adrija Chatterjee works for Moneycontrol as an assistant editor. For more than eight years, she has been monitoring and reporting on the ministries of trade and finance.
📦 India-US Trade Highlights
- Tariffs Reduced: Pharmaceuticals, jewels, industrial commodities, agriculture, aircraft parts
- Reciprocal Rate: 18% on selected goods
- US Provisions: Favorable auto parts quota, rollback on aircraft tariffs
- Non-Tariff Barriers: Regulatory hurdles in medical devices, ICT & agricultural products to be addressed
Frequently Asked Questions
1. Which goods fall under the trade agreement between the United States and India?
The agreement includes jewels and diamonds, pharmaceuticals, industrial commodities, agricultural products, and aircraft and aircraft parts. To promote commerce, the US and India have decided to lower tariffs on several goods.
2. How will this approach affect tariffs?
On certain items, the United States and India have decided to reduce reciprocal duties to 18%. For instance, India will lower duties on American industrial items, food, and agricultural products, while the US will lower tariffs on Indian pharmaceuticals, diamonds, and aviation parts.
3. Which non-tariff obstacles will India deal with?
India has committed to addressing regulatory barriers that impact US exports, such as those pertaining to agricultural products, medical devices, and information and communication technology (ICT) items.
4. Do US and Indian industries have any special treatment?
Yes. In addition to offering preferred tariff-rate quotas for car parts, the US will remove some national security-related duties on Indian aircraft and aircraft parts. Depending on the results of the ongoing US Section 232 investigation, Indian medicinal ingredients might also be advantageous.
5. What will happen with the trade agreement next?
In order to prepare for a more comprehensive Bilateral Trade Agreement (BTA) in the future, both nations intend to swiftly put this framework into effect and seek to complete a mutually advantageous Interim Agreement.
💡 Key Takeaways of India-US Trade Deal
- Boost Exports: Reduced tariffs on pharmaceuticals, diamonds, aircraft parts
- Market Access: Easier US market entry for Indian products
- Regulatory Improvements: Non-tariff barriers addressed
- Future Prospects: Framework sets stage for comprehensive BTA
Conclusion
An important step toward enhancing bilateral trade relations is the India-US temporary trade agreement. The deal intends to increase exports, enhance market access, and establish a more equitable trade relationship by lowering tariffs and removing long-standing non-tariff barriers. This framework lays the groundwork for a comprehensive bilateral trade agreement that might be advantageous to both sides’ consumers and sectors.
Disclaimer: This article is for informational purposes only and does not constitute financial or trade advice.
