India-US Trade Deal: Rethinking the Interim Agreement

US-India Trade Agreement: Key Developments and Implications

Overview

The US-India trade agreement, announced in February 2026, marks a significant shift in the bilateral trade relationship. The agreement, which is part of a broader framework deal, aims to address trade concerns and promote economic cooperation between the two nations.

Background

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The US-India trade relationship has been marked by controversy, particularly with regards to tariffs imposed by the US government under the International Emergency Economic Powers Act (IEEPA). The IEEPA, enacted in 1977, has been used to impose tariffs on various countries, including India. However, the US Supreme Court (Scotus) has ruled that the IEEPA cannot be used to impose tariffs by the executive.

Framework Trade Agreement

The framework trade agreement, announced in February 2026, provides a framework for future negotiations. The agreement includes a provision that allows either country to modify its commitments in the event of changes to agreed-upon tariffs. This provision could be used to re-negotiate key aspects of the agreement.

Key Issues for Re-Negotiation

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Three primary issues need to be addressed through re-negotiation or clarification:

1. Russian Oil: The US-India joint statement does not mention the issue of Russian oil, while the US executive order and fact sheet link the removal of 25% tariff to India's commitment to stop buying Russian oil. India should clarify its commitment to stop buying Russian oil and the implications of this commitment.
2. Tariffs on US Agricultural Products: The US fact sheet has been more wide-ranging in its claims about tariffs applicable to export of US agricultural products. Indian negotiators should push for clarity and a shared understanding about these tariffs.
3. Digital Trade: The Indian and US versions are at variance regarding digital trade. Indian negotiators should push for the Indian version to be accepted as the commonly agreed one, given the sovereignty implications involved.

Implications of the US-India Trade Agreement

The agreement has significant implications for the US-India trade relationship. The US has already downgraded the language of India's commitment to much weaker language, making it clear that the $500 billion import figure is not a binding commitment. Indian negotiators should focus on addressing key issues through re-negotiation or clarification, rather than getting bogged down in unrealistic figures.