US-India Trade Deal Cuts Tariffs, Eases Tensions

Following months of tense negotiations, the United States and India reached an initial trade agreement aimed at reducing tariffs on Indian imports and strengthening economic ties between the two nations. Key provisions include a reduction in US tariffs on Indian goods and India’s pledge to open markets for US exports, though many details remain unresolved. This LawFlash examines the background and next steps of this trade agreement as well as the legal considerations for companies operating within the context of the Indian market.

Recent years have seen escalating trade tensions between the United States and India, with the US imposing steep tariffs on Indian exports in 2025—first at 25%, then doubled to 50%—in response to stalled negotiations and India’s continued purchase of Russian oil. These tariffs made India one of the most expensive markets for US importers and eroded its appeal as a manufacturing hub, particularly for companies seeking alternatives to China.

The United States is India’s largest trading partner, with bilateral trade reaching $129.2 billion in 2024, though it has been pursuing free-trade agreements with other partners, including the European Union, Britain, Oman, and New Zealand, in an effort to diversify its markets and mitigate the impact of US tariffs. Trade negotiations between the United States and India have long been hampered by disagreements over agricultural market access, non-tariff barriers, and immigration policies.

CORE LEGAL DEVELOPMENT

On February 2, 2026, President Donald Trump announced on social media that the United States had reached an agreement with India to roll back tariffs on Indian imports from 50% to 18%. In exchange, India has reportedly agreed to eliminate tariffs and non-tariff barriers on US goods, with the stated goal of bringing these barriers “to ZERO.”

The deal also includes India’s commitment to stop purchasing Russian oil and increase imports of US energy, technology, agricultural, coal, and other products. President Trump claimed that India would “BUY AMERICAN, at a much higher level,” including “$500 BILLION DOLLARS of U.S. Energy, Technology, Agricultural, Coal, and many other products.”

Prime Minister Narendra Modi expressed his support for the tariff reduction, stating, “When two large economies and the world’s largest democracies work together, it benefits our people and unlocks immense opportunities for mutually beneficial cooperation. President Trump’s leadership is vital for global peace, stability, and prosperity.”

On February 6, 2026, the White House published a joint statement identifying some key points of the negotiation and revised the president’s executive order imposing tariffs on India related to the purchase of Russian oil to eliminate those tariffs effective 12:01 am EST February 7. This removal was subsequently implemented on February 9 in US Customs and Border Protection’s (CBP’s) Cargo Systems Messaging Service (CSMS), which provides instructions to importers and brokers on processing import entries through CBP’s electronic import system.

However, the framework agreement remains short on specifics, and the CSMS message notably provides that the 25% reciprocal tariff rate on Indian-origin imports into the United States “remain[s] in effect” rather than the new 18% framework tariff rate, at least for now.

While President Trump emphasized India’s pledge to reduce tariffs and non-tariff barriers, Indian officials have so far avoided confirming the elimination of all barriers or ending Russian oil purchases. India’s commerce minister, Priyush Goyal, confirmed the intention to sign a deal but gave no further details on the terms or implementation. This ambiguity aligns with other announced bilateral agreements resulting from negotiations over US tariffs.

IMPLICATIONS FOR US AND INDIAN BUSINESSES

The reduction in tariffs represents an immediate opportunity for increased trade and investment in India. Companies exporting to or importing from India may benefit from lower costs and improved market access, particularly in sectors such as pharmaceuticals, auto parts, chemicals, and agriculture. Analysts have noted that the deal could restore India’s position as a preferred manufacturing destination, especially for firms seeking to diversify away from China.

Nevertheless, the agreement’s lack of detail introduces significant uncertainty. Key questions remain about the scope of tariff reductions, the timeline for implementation, and the treatment of sensitive sectors such as agriculture. Indian agriculture, which supports nearly half of the country’s population, has traditionally been protected by high tariffs and regulatory barriers, and recent farmer protests illustrate the political sensitivity of further market opening. As Prime Minister Modi noted, “For us, the welfare of our farmers is of the highest priority. Bharat will never compromise on the interests of its farmers.”

Some US business groups have expressed concern that even with the reduced 18% tariff, US importers will face significantly higher costs compared to previous years.  Further, the promise of $500 billion in Indian purchases of US goods appears ambitious relative to India’s total annual government budget of $590 billion, and may not be immediately realizable. Additionally, the absence of a formal free trade agreement or clearly defined labor, environmental, and digital tax provisions could limit the deal’s long-term impact.

Companies should monitor developments closely and review their supply chain strategies in light of the changing tariff landscape. Businesses with exposure to Indian markets will want to carefully consider compliance with new trade rules, contract renegotiations, and risk mitigation strategies, especially in industries subject to ongoing political and regulatory uncertainty. Businesses should also stay alert for future government releases and implementation documents, especially through the CSMS, as the White House has stated that further details will be forthcoming.

STEPS IN THE RIGHT DIRECTION

The US-India trade deal marks an important step toward resolving bilateral tensions and expanding economic cooperation, but its full implications will depend on future negotiations and the clarity of implementation. While reduced tariffs offer immediate benefits to some sectors, uncertainties regarding market access, sensitive industries, and regulatory details persist. Businesses engaged in US-India trade should closely monitor further developments and remain agile in adapting to new policy shifts.

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