India-US trade hit a record $132.2 billion in FY25. Then tariffs nearly blew it up. Here’s where things stand.
The February Deal
On February 2, PM Modi and President Trump announced a framework trade deal. The headline: US reciprocal tariffs on Indian goods drop from 25% to 18%. In return, India committed to purchasing $500 billion in US goods over five years — energy, aircraft, tech products, and coking coal.
India also agreed to cut tariffs on US industrial goods, reduce barriers on American medical devices, agricultural products, and ICT goods. Commerce Secretary Rajesh Agrawal has said the interim agreement could be signed by mid-March.
The catch: India pledged to stop purchasing Russian oil. That’s geopolitically significant — and domestically contentious.
Then the Supreme Court Stepped In
On February 20, the US Supreme Court ruled that IEEPA — the law Trump used to impose tariffs — doesn’t authorize tariffs at all. The ruling in Learning Resources v. Trump invalidated the entire IEEPA tariff regime.
Trump responded within hours. He issued a Proclamation under Section 122 imposing a 10% “temporary import surcharge” on all countries, effective February 24. The next day, he raised it to 15%.
For India, this means the negotiated 18% deal rate is currently in legal limbo. The effective tariff on Indian goods is now the 15% blanket surcharge. The bilateral deal’s specific provisions — agriculture access, medical devices, ICT — are still being negotiated separately.
What’s Actually at Stake
The numbers are big. US goods imports from India hit $103.8 billion in 2025, up 19% year-on-year. The US trade deficit with India: $58.2 billion. Industry body PHDCCI projects bilateral trade could touch $300 billion by FY27 — but only if the deal holds.
The friction points remain. Intellectual property, data localization rules, agricultural market access, and India’s non-tariff barriers are all on the table for the broader Bilateral Trade Agreement still being negotiated.
Defence and tech are the glue. Even through tariff turbulence, defence trade and tech collaboration (semiconductors, AI, space) have continued to deepen. That strategic alignment is what keeps both sides at the table.
What to Watch
The mid-March interim agreement deadline. If signed, it locks in tariff rates and purchase commitments. If it slips, the 15% blanket surcharge — and uncertainty — continues.
Sources: White House, USTR, CNBC, PIIE, DLA Piper, Supreme Court