US and India unveil interim trade framework, move closer to broad pact

WASHINGTON – The United States and India moved closer to a trade pact on Feb 6, releasing an interim framework that would lower tariffs, reshape energy ties and deepen economic cooperation as both countries seek to realign global supply chains.

The framework reaffirms a commitment to negotiations toward a broader bilateral trade agreement, the two governments said in a joint statement, while noting that further negotiations were needed to complete the pact.

US President Donald Trump announced a deal with India on Feb 2 to cut US tariffs on Indian goods to 18 per cent
from 50 per cent in exchange for India halting purchases of Russian oil and lowering trade barriers.

Half of the 50 per cent rate had been imposed separately by Mr Trump as punishment for India’s purchases of Russian oil, which he said were fuelling Moscow’s war effort in Ukraine.

Mr Trump signed an executive order on Feb 6 rescinding that 25 per cent portion after India agreed this week to shift its oil buying to the US and Venezuela.

New details on tariff reductions

The Feb 6 joint statement provides additional details compared with initial outlines of the trade deal revealed by Mr Trump on Feb 2.

It confirms that India will purchase US$500 billion (S$636 billion) in US goods over a five-year period, including oil, gas, coking coal, aircraft and aircraft parts, precious metals, and technology products.

The last category includes graphics processing units, typically used for artificial intelligence (AI) applications, and other goods used in data centres.

It said India would eliminate or reduce tariffs on all US industrial goods and a wide range of US food and agricultural products, including dried distillers’ grains and red sorghum for animal feed, tree nuts, fresh and processed fruit, soybean oil, wine and spirits.

US to keep 18 per cent tariff

But the deal will apply an 18 per cent tariff rate on most imports to the US from India, including textiles and apparel, leather and footwear, plastic and rubber, organic chemicals, home decor, artisanal products and certain machinery.

India will get the same tariff relief granted to other allied countries that have signed trade deals with the United States on certain aircraft and aircraft parts, and will receive a quota for auto parts imports that will be subject to a lower tariff rate, according to the statement.

Depending on the results of the Trump administration’s tariff investigation into pharmaceuticals and their ingredients, “India will receive negotiated outcomes with respect to generic pharmaceuticals and ingredients”, the statement said.

Indian Trade Minister Piyush Goyal hailed the framework agreement in a social media post on X as opening a market worth US$30 trillion – the US annual GDP – to Indian exporters, especially farmers, fishermen, and micro and small-to-medium enterprises.

Mr Goyal had said on Feb 5 that Washington and New Delhi aimed to sign a formal trade agreement in March, after which India’s tariff cuts on US exports would go into effect.

Accepting US standards

India also agreed to address longstanding non-tariff barriers on imports of agriculture products, medical devices and communications gear, with negotiations to be completed within six months on an agreement to accept US or international safety and licensing standards for product imports.

The US affirmed that it intends to consider India’s requests for lower tariffs on Indian goods during further negotiations of the bilateral trade agreement.

The two sides also agreed to cooperate on enforcement of export controls on sensitive technologies and take actions to address “non-market policies of third parties”, a reference to China.

The United States and India have struggled for years to conclude a full trade deal, with disputes spanning agriculture, digital trade, medical devices and market access.

But strategic concerns – including competition with China, supply-chain diversification and energy security – have injected new urgency into talks, officials in both countries say. REUTERS