India–US Signed Trade Agreement

Syllabus: GS2/IR

In News

• India and the United States have announced a new trade deal, lowering tariffs and setting ambitious targets for bilateral trade.
  • In August 2025, the US had levied tariffs up to 50% (25% reciprocal + 25% additional duty) linked to India’s Russian oil imports.

About the India–US Trade Deal

• Tariff reduction: US reciprocal tariffs on Indian goods reduced from 25% to 18%, effective immediately.
  • Additional 25% duty withdrawn, which had earlier been imposed.
• US claims on broader commitments: The US asserts the deal includes zero tariffs and non‑tariff barriers for US goods and that India committed to buy over $500 billion of US products across energy, tech, agriculture, coal, etc.
  • India will progressively reduce tariffs and non-tariff barriers against US goods.

Importance of the Deal

• It strengthens India–US ties amid global geopolitical shifts, especially regarding China.
  • Helps counter China’s dominance in global trade and manufacturing.
• Lower tariffs could improve competitiveness for Indian exporters (farmers, MSMEs, entrepreneurs) and attract investment.
  • This would support Make, Design and Innovate in India for the world.
• Diversifying oil imports may reduce India’s dependence on Russia, though at higher costs.
• It would help stabilize the rupee amid global economic uncertainty.
• It will position India as a key partner in US-led trade and security frameworks.

Challenges 

• India faces multiple challenges in trade and energy: domestic opposition limits opening agricultural markets to US imports, halting discounted Russian crude would raise energy costs and strain refiners, and higher US H-1B visa fees hinder Indian IT professionals, with services issues unaddressed in trade deals.
• Additionally, US threats of tariffs on Iran trade have forced India to scale back trade and pause Chabahar port investment.

Source :TH