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India, US Establish Interim Trade Agreement

  //food-wine.news-articles.net/content/2026/02/06/india-us-establish-interim-trade-agreement.html
  Published in Food and Wine on Friday, February 6th 2026 at 23:08 GMT by ThePrint
      Locales: UNITED STATES, INDIA

New Delhi, February 7th, 2026 - In a move hailed by economists and trade officials as a significant thaw in recent tensions, India and the United States have formally established a framework for an interim trade agreement. The core of the deal centers around a reduction of Indian tariffs on a select range of US goods to 18%, a considerable step down from existing rates, and a corresponding agreement for tariff rate quotas (TRQs) allowing increased Indian exports to the US market.

The agreement, painstakingly negotiated over the past several months between Indian Commerce Minister Piyush Goyal and United States Trade Representative Katherine Tai, represents a pragmatic approach to revitalizing the historically important, but recently strained, bilateral trade relationship. While a full, comprehensive free trade agreement remains a longer-term ambition, this interim step demonstrates a clear commitment from both sides to address immediate concerns and build momentum for deeper economic cooperation.

Details of the Agreement & Impact on Key Sectors

Under the terms of the agreement, India will lower tariffs on a range of US products, impacting sectors like automotive components, certain agricultural goods, and technology hardware. Critically, the 18% tariff rate applies within established TRQs, meaning the reduced rate is applicable up to a specific volume of imports. Beyond that volume, standard tariffs will apply. This mechanism aims to provide US exporters with guaranteed access while allowing India to protect its domestic industries.

Conversely, India secures preferential access to the US market for key export sectors, notably apparel, footwear, and chemicals. The TRQs for these goods will allow Indian manufacturers to ship a pre-determined quantity of products to the US at reduced duty rates, bolstering their competitiveness and increasing export revenues. Industry analysts predict a substantial boost for India's textile and chemical industries, potentially creating thousands of new jobs.

From Retaliation to Reconciliation: A History of US-India Trade Disputes

The road to this interim agreement wasn't without its bumps. Over the last few years, escalating trade tensions saw both nations imposing retaliatory tariffs on a variety of goods. The US, citing concerns over intellectual property protection and market access barriers in India, imposed tariffs on steel, aluminum, and certain agricultural products. India responded in kind, targeting US agricultural produce, Harley-Davidson motorcycles, and other goods. These tariffs significantly hampered bilateral trade, creating uncertainty for businesses and investors.

This current framework is largely seen as a direct response to those prior disputes. The agreement demonstrates a willingness to compromise and find mutually beneficial solutions. Experts believe it signals a shift towards a more constructive dialogue aimed at resolving outstanding issues and fostering a more predictable trade environment. The agreement, while not eliminating all trade barriers, establishes a baseline for future negotiations.

Looking Ahead: Prospects for a Comprehensive Trade Deal

The successful negotiation of this interim agreement has ignited speculation about the possibility of a full-fledged free trade agreement. While significant hurdles remain - including disagreements over intellectual property rights, data localization, and agricultural subsidies - the current momentum is encouraging.

"This interim agreement isn't the finish line; it's a vital stepping stone," explained Dr. Arpita Chatterjee, a trade economist at the Indian Council for Research on International Economic Relations. "It builds trust and establishes a framework for addressing more complex issues in future negotiations. A comprehensive deal would require a deeper commitment to addressing structural challenges and ensuring a level playing field for businesses in both countries."

Several key areas remain under discussion. The US continues to push for greater intellectual property protection and reduced barriers to its digital services sector. India, on the other hand, is seeking greater market access for its agricultural products and increased investment flows from the US. Resolving these issues will require sustained diplomatic efforts and a willingness to find creative solutions that benefit both economies.

The interim agreement is expected to take effect following the completion of necessary regulatory approvals and official notifications in both countries. The coming months will be crucial as businesses adapt to the new trade landscape and policymakers begin laying the groundwork for a more comprehensive and lasting trade partnership between the world's two largest democracies.