U.S. and India Seal Comprehensive Trade Truce: Tariffs Lifted on Key Goods in Major Economic Reset
Published Date: 3 Feb, 2026
February 03, 2026
Washington and New Delhi announced a sweeping bilateral trade agreement Monday evening that dismantles long-standing tariff barriers, restores market access for billions in annual commerce, and lays groundwork for deeper cooperation in technology, critical minerals, and supply chains. The pact ends a multi-year cycle of retaliatory duties that had clouded one of the world's most strategically important economic relationships.
President Donald Trump called the deal "a tremendous victory for American farmers, manufacturers, and workers," while Indian Prime Minister Narendra Modi described it as "a decisive step toward unbreakable economic partnership between the two largest democracies."
Key Provisions of the Agreement
The truce directly resolves the principal disputes that began in 2019:
- The United States will immediately remove the additional 25 percent and 10 percent tariffs on Indian steel and aluminum imposed under Section 232.
- India will eliminate its countervailing duties on 28 U.S. export products, including almonds, apples, walnuts, chickpeas, cranberries, certain motorcycles, and select automobiles.
- Both governments commit to reinstating Most Favored Nation treatment on the affected tariff lines and to refrain from introducing new punitive measures without prior consultation.
- A joint ministerial-level working group will be formed within 60 days to address remaining barriers in agriculture (dairy, poultry), medical devices, digital services taxes, data localization requirements, and intellectual property enforcement.
- Side arrangements include enhanced collaboration on semiconductor supply chains, rare earth minerals, and clean energy technology transfers.
Officials project the agreement will add at least 15 to 20 percent to bilateral goods trade over the next three years, benefiting sectors that had faced significant market disruptions.
Negotiation Breakthrough After Years of Friction
The trade tensions originated in 2019 when India withdrew the United States from its Generalized System of Preferences program and the Trump administration responded with metal tariffs. India then imposed retaliatory duties, and both countries pursued parallel WTO disputes.
Talks gained momentum following President Trump's inauguration, with frequent engagement between U.S. Trade Representative Jamieson Greer and Indian Commerce and Industry Minister Piyush Goyal. A decisive round occurred during External Affairs Minister S. Jaishankar's recent Washington visit, where both sides agreed to pursue a comprehensive rather than piecemeal resolution.
The deal complements existing bilateral mechanisms such as the Trade Policy Forum, the Commercial Dialogue, and the Initiative on Critical and Emerging Technology (iCET), aligning trade normalization with broader strategic priorities.
Sectoral and Market Reactions
U.S. agricultural producers, especially in California and the Midwest, welcomed the immediate removal of Indian tariffs that had cost exporters hundreds of millions annually. Indian generic pharmaceutical companies and information technology service providers expressed optimism about renewed predictability.
Equity markets in both countries reacted favorably, with gains concentrated in agriculture, metals, consumer goods, and technology-related stocks. The Indian rupee strengthened modestly against the U.S. dollar in early trading.
Strategic Significance Beyond Economics
The agreement reinforces the deepening U.S.-India alignment on geopolitical and economic fronts. Senior officials framed the truce as a deliberate effort to build resilient, friend-shored supply chains and reduce vulnerabilities exposed during recent global disruptions.
The deal also signals India's continued importance in U.S. efforts to diversify manufacturing and technology partnerships away from single-country reliance, while supporting New Delhi's ambition to become a global hub for advanced manufacturing and services.
Although certain agricultural quotas, dairy market access, and digital trade regulations remain outstanding, both capitals pledged sustained dialogue through the new working group. Tariff eliminations will phase in fully within 90 days, with immediate provisional relief on many lines.
The U.S.-India trade truce clears a major obstacle that had constrained deeper economic integration for years. By resolving old grievances and creating new channels for cooperation, the agreement strengthens the foundation for expanded bilateral commerce and strategic convergence in an increasingly multipolar world.
Date: 3 Feb, 2026
