The United States and India have formally agreed to an interim trade framework, marking a significant reset in bilateral economic ties after nearly a year of prolonged negotiations. The deal, which follows a public announcement by U.S. President Donald Trump, sees Washington eliminating punitive tariffs while New Delhi successfully insulates its sensitive agriculture and dairy sectors from foreign competition.
Under the new framework, the U.S. has agreed to slash the “reciprocal” levy faced by Indian products, bringing the effective tariff rate down to 18 percent. perhaps most significantly, the additional 25 percent tariff previously imposed by the Trump administration—explicitly linked to India’s procurement of Russian oil—has been scrapped entirely.
Government sources indicate the pact could open a USD 30 trillion market for Indian exporters, yet the framework reveals a careful balancing act regarding market access. While the U.S. secured concessions in specific areas, negotiators stopped short of crossing India’s “red lines” regarding the politically sensitive dairy and staple agricultural sectors.
“Agriculture, food and dairy products were the most difficult parts of the negotiations,” the text of the analysis notes, highlighting India’s refusal to dilute protections citing farmer livelihoods and food security. Consequently, dairy products are notably absent from the agreement.
Instead, India has offered tariff reductions on a defined list of U.S. agricultural goods that do not threaten core domestic interests, including tree nuts, fresh and processed fruits, soybean oil, wines, and spirits. The deal also opens the door for U.S. exports of feed products like red sorghum and dried distillers’ grains (DDGs).
Analysts suggest the influx of American DDGs will be closely watched by domestic stakeholders, as a surge in volume could depress prices for local soymeal and grain-based ethanol byproducts, potentially straining Indian soybean farmers.
Current trade data underscores why India remained cautious. In 2024, India’s agricultural exports to the U.S. stood at approximately $6.2 billion—nearly three times the value of U.S. agricultural exports to India, which were valued at $2.25 billion. With a substantial trade surplus already in hand, New Delhi had little incentive to risk destabilizing its rural economy.
Both nations view this interim framework as a stepping stone. While implementation details regarding specific volumes for products like apples remain to be clarified, negotiations are set to continue toward a comprehensive Bilateral Trade Agreement
