Trade Policy
US-India Trade Deal: Framework, Tariffs & What It Means for Exporters (2026)
In February 2026 the US and India announced a framework for an interim trade deal: US tariffs on Indian goods fall to 18%, and India cuts tariffs on US industrial and agricultural goods. Here is what was agreed, where the deal stands now, and what Indian exporters should watch.
The US-India trade deal at a glance
The United States and India launched negotiations for a comprehensive Bilateral Trade Agreement (BTA) in February 2025, and on 6 February 2026 the two governments announced a framework for an interim agreement — the first step towards the broader BTA. The framework is real and documented: a White House joint statement and fact sheet set out what each side agreed.
The direction of travel matters more than any single number: the US agreed to lower its reciprocal tariff on India to 18% and remove a range of product tariffs, and India agreed to open its market much wider to US industrial and agricultural goods. As of August 2026 the framework is not yet implemented — the details below are what was agreed, followed by where things stand now.
What India agreed to
- Eliminate or reduce tariffs on all US industrial goods.
- Cut tariffs on a wide range of US food and agricultural products — including dried distillers’ grains, red sorghum for animal feed, tree nuts, fresh and processed fruit, soybean oil, and wine and spirits.
- Address non-tariff barriers: ease access for US medical devices, lift restrictive import licensing on ICT goods, and evaluate US or international standards for testing in identified sectors.
- Resolve long-standing non-tariff barriers on US food and agricultural exports.
What the US agreed to
- Apply a reciprocal tariff of 18% on originating goods of India, down from 25% (under Executive Order 14257 of 2 April 2025, as amended).
- Remove the additional 25% tariff on Indian imports.
- Remove tariffs on generic pharmaceuticals, gems and diamonds, and aircraft parts, subject to the interim agreement concluding successfully.
- Remove Section 232 tariffs on certain Indian aircraft parts, steel and aluminium items, and copper, and provide a preferential tariff-rate quota for automotive parts.
- Agree that if either side changes agreed tariffs, the other may modify its commitments.
Where the deal stands now (mid-2026)
The framework has not yet turned into a signed, implemented agreement. In mid-2026 the interim deal was described by Indian officials as needing only “final touches”, but India is deliberately holding back for clarity on the US tariff picture before it commits to tariff cuts.
- The US Supreme Court struck down the IEEPA tariffs, removing the 50%+ pressure that originally made the 18% deal attractive to India.
- A temporary global tariff (Section 122) applied to all countries including India lapsed on 24 July 2026, pulling most US import tariffs back towards normal MFN levels.
- Two Section 301 investigations remain pending: one on forced labour (with a proposed 12.5% duty on Indian imports, versus 10% proposed on rivals like Bangladesh and Pakistan) and one on excess industrial capacity.
- India says it will only finalise a deal that secures a competitive advantage over rival supplier countries — which is why finalisation is waiting on those outcomes.
What it means for Indian exporters
For exporters, the prize is a structural tariff advantage: if the deal lands as framed, Indian goods face an 18% reciprocal tariff instead of higher alternatives, and generic pharmaceuticals, gems and diamonds and aircraft parts lose their tariffs entirely. Textiles, leather, footwear, organic chemicals and machinery ride the 18% rate.
But the tariff outcome is not something an exporter can wait for. The current duty on your HS code is the number that matters for pricing today — and the payment and financing structure of the deal is entirely within your control.
How to prepare for a US order now
- Confirm the current applied US duty for your HS code — do not price off the framework terms before they are implemented.
- Set payment terms that you can finance: US buyers sit in a market with broad factoring coverage.
- Keep LC and document compliance clean — a discrepancy delays the same payment whether or not a trade deal exists.
- If the deal adds tariff relief later, treat it as margin, not as the foundation of your pricing.
Frequently asked questions
What is the US-India trade deal status?
As of August 2026, the two countries have a framework for an interim agreement (announced 6 February 2026) but the deal is not yet signed and implemented. Officials say it needs only final touches, but India is waiting for clarity on US tariffs, including the outcome of two Section 301 investigations, before committing.
What were the key terms of the February 2026 framework?
India agreed to eliminate or reduce tariffs on US industrial goods and a range of food and agricultural products (including dried distillers’ grains, red sorghum, tree nuts, fruit, soybean oil and wine). The US agreed to cut its reciprocal tariff on India from 25% to 18%, remove an additional 25% tariff, and remove tariffs on generic pharmaceuticals, gems and diamonds, and aircraft parts, with relief on certain steel, aluminium and copper duties.
Will US tariffs on Indian goods come down?
Under the framework, yes — to an 18% reciprocal rate plus the removal of several product-specific tariffs. But because the deal is not yet implemented, current tariffs are still in flux: the IEEPA tariffs were struck down by the US Supreme Court, and a temporary global tariff lapsed on 24 July 2026, so exporters should confirm the current duty rate for their product code before pricing.
Which Indian sectors stand to gain most?
Generic pharmaceuticals, gems and diamonds, and aircraft parts were explicitly named for tariff removal by the US. Textiles, leather, footwear, organic chemicals and certain machinery face the 18% reciprocal rate instead of higher alternatives. Section 232 relief was agreed for aircraft parts and some steel and aluminium items, and a preferential quota for automotive parts.
When will the US-India trade deal be finalised?
There is no confirmed date. Officials in mid-2026 described the interim deal as needing only final touches, but India is holding for assurance of a competitive advantage over rival suppliers and for the outcome of the Section 301 investigations (forced labour and excess industrial capacity). Watch for those findings before expecting finalisation.
What should Indian exporters do now?
Do not wait for the deal to price a US order — check the current applied duty for your HS code, confirm the payment terms and financing coverage for US buyers (the US has broad factoring coverage), and keep documentation clean. If the deal lands, the tariff advantage is a bonus; the financing and payment structure is what you control.
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