India–US Trade Deal 2026

Effective US tariff on Indian goods: 18% (down from ~50% in 2025).\
Previous tariff structure (2025): 25% reciprocal tariff + 25% punitive duty linked to India’s purchase of Russian crude oil.\
India’s commitments:\
Halt or significantly reduce Russian crude oil imports; pivot to US (and possibly Venezuelan) supplies.\
Reduce tariffs and non‑tariff barriers on US goods to zero for government and large‑scale industrial procurement.\
Adopt a stronger "Buy American" stance, targeting up to USD 500 billion of US energy, coal, technology, agricultural and other products.\
Bilateral trade (FY25): USD 132 billion total; India’s trade surplus with the US: USD 40.82 billion.\
US as investor: 3rd largest source of FDI in India, cumulative inflows USD 70.65 billion (2000‑2025).\
US‑India COMPACT (2025): Launched the Mission 500 initiative to achieve USD 500 billion bilateral trade by 2030.

Tariff escalation (2025): The US imposed a 25% reciprocal tariff to match India’s average import duties, then added a 25% punitive duty in August 2025 because India continued buying Russian oil amid the Ukraine conflict.\
Strategic leverage: The US used tariff pressure to influence India’s regional actions, notably after Operation Sindoor (May 2025) against terrorist targets in Pakistan.\
India’s pre‑deal reforms: Reduction of duties on heavy motorcycles and bourbon whisky; passage of the SHANTI Act, 2025 to open the nuclear power sector.

Export competitiveness: The 18% tariff restores Indian exporters’ price advantage, especially in textiles, apparel, pharmaceuticals, and engineering goods, making India more competitive than Vietnam (20%), Bangladesh (20%) and China (30‑35%).\
Economic stability: Removal of punitive duties reduces uncertainty, stabilises the rupee and encourages renewed FDI into manufacturing.\
Energy security: Shifting away from Russian crude aligns with the US’s energy export interests and supports India’s National Green Hydrogen Mission and nuclear SMR programmes.\
Technology & digital trade: Tax holidays for foreign data‑center investments benefit US tech giants; however, data‑localisation requirements under India’s DPDP Act, 2023 remain a negotiation point.\
Agricultural sector risk: Zero‑tariff commitments could expose Indian dairy and poultry farmers to subsidised US imports, necessitating safeguard measures.

Foreign Trade Policy (2025‑30): Provides the framework for tariff adjustments and export promotion.\
Generalised System of Preferences (GSP): India lost the 5% GSP concession in 2019; the current deal does not restore it, affecting regional parity.\
Intellectual Property Rights (IPR) Regime: Potential alignment with US standards may impact pharma pricing and access to medicines.\
DPDP Act, 2023: Governs data protection and localisation, intersecting with US demands for free data flow.

Strategic autonomy vs transactional diplomacy: India must balance its multi‑aligned foreign policy with the economic incentives tied to US concessions.\
China’s possible retaliation: Retaliatory barriers on rare‑earths and APIs could affect Indian manufacturing.\
Friend‑shoring opportunities: The stable 18% tariff environment can attract supply‑chain shifts from China to India, supporting the Make in India agenda.

Energy transition: Accelerate green hydrogen and nuclear SMR projects to offset higher costs from reduced Russian oil imports.\
Safeguard agriculture: Implement product‑specific safeguards to protect vulnerable farmers while honouring zero‑tariff commitments.\
Regulatory harmonisation: Fast‑track the Bilateral Trade Agreement (BTA) to address SPS standards and IPR alignment.\
Leverage iCET: Deepen collaboration in AI, space and semiconductor technologies under the US‑India iCET framework.

Drishti Mains Question: Assess the opportunities and risks for India arising from the recent India–US trade deal.