India-US trade pact reshapes tariffs, tech flows

India and the United States have agreed the framework for the first phase of a bilateral trade agreement that will cut tariffs on a broad set of goods and expand technology trade. The interim pact was announced after Washington and New Delhi released a joint statement outlining planned reductions in import duties and new cooperation on critical technology products.

Under the framework, the US will reduce tariffs on Indian goods to 18%, down from a previous 50% level on some items. India, in turn, will lower or remove duties on a series of US exports, including high-end vehicles, motorcycles and a range of industrial and consumer products. Both sides have also linked the agreement to wider US-India coordination on security and trade policy.

Indian officials and industry groups said the pact should provide relief to labour‑intensive export sectors that had been hit by steep US tariffs since August 27. Those duties, which reached 50%, had weighed on shipments of apparel, leather and footwear, plastics, rubber, organic chemicals, home décor and certain machinery.

According to a joint statement cited by Indian media, US tariffs on Indian goods will be cut to 18%, and an additional 25% punitive duty imposed earlier will be removed. Manoj Mishra of Grant Thornton Bharat said the move would support pricing stability and supply continuity for pharmaceuticals, while apparel and leather exporters forecast a meaningful boost to sales. The Gems and Jewellery Export Promotion Council noted that Indian cut and polished diamond exports to the US had fallen sharply under higher tariffs and said zero‑duty treatment on diamonds and coloured gemstones could restore competitiveness.

On the import side, India will gradually reduce tariffs on traditional internal‑combustion cars with engines above 3,000cc to 30% over 10 years, down from rates as high as 110%. An Indian government official told Reuters that duties on high‑end US cars would follow this path once the agreement is signed, which is expected in March.

India will also eliminate duties on Harley‑Davidson motorcycles and extend reduced tariffs to other premium motorbikes. However, electric vehicles are explicitly excluded from the deal. That omission shuts Tesla out of any lower‑tariff route into the Indian market for now, despite repeated criticism from Elon Musk of India’s high import duties. The stance contrasts with India’s separate negotiations with the European Union, where steeper tariff cuts across a wider range of vehicles, including some eventual EV concessions, have been offered.

The interim pact places particular emphasis on information and communication technology (ICT) products and AI‑related hardware. Commerce and Industry Minister Piyush Goyal said India needs US ICT goods, including Nvidia chips and AI equipment, for developing data centres and advancing artificial intelligence and quantum computing initiatives.

Under the agreement, India has committed to eliminate restrictive import licensing procedures that delay market access for, or impose quantitative restrictions on, US ICT goods. Both countries said they will significantly increase trade in technology products such as graphics processing units (GPUs) and other equipment used in data centres, and expand joint technology cooperation.

New Delhi will, within six months of the agreement’s entry into force, determine whether US‑developed or international standards, including testing requirements, can be accepted for US exports in identified sectors. Goyal said access to advanced American equipment would open opportunities for domestic industries in data centres, AI and related fields, while US negotiators secured lower tariffs for a wide set of industrial and consumer exports.