After months of escalating tensions and ongoing negotiations, the United States and India announced an interim trade agreement, with a final comprehensive accord expected in March.
The agreement is a welcome and long-overdue development, representing a deliberate effort by both governments to step back from an increasingly untenable trajectory and to restore a degree of stability to an economic relationship that had come under sustained strain.
The US-India strategic partnership has weathered one of its most difficult periods in over 25 years. While other arenas of the bilateral relationship continued to advance, economic tensions steadily accumulated. The Trump administration's decision to impose punishing 50 per cent tariffs on India plunged the bilateral relationship into crisis and uncertainty, with many questioning the longstanding bipartisan consensus surrounding the relationship as well as its underlying strategic logic. Half of the tariff rate was purportedly the result of India's imports of Russian oil, underscoring the far-reaching geopolitical dimension to the trade tensions.
For months, a resolution to arrest the downward trajectory of the trade relationship appeared elusive. Both sides, however, recognised that the status quo was unsustainable. The finalisation of a comprehensive trade deal between the EU and India, following more than two decades of stalled negotiations, injected new urgency in the US-India negotiations. Allowing trade disputes to persist without a clear path forward risked undermining confidence in the broader relationship and limiting the effectiveness of cooperation in other areas.
The interim framework reflects a mutual recognition that the ongoing dispute could not persist unaddressed.
At the most fundamental level, the framework succeeds in stabilising the trade relationship. The establishment of a reciprocal tariff baseline and the removal of the additional duties imposed last year reduce uncertainty for exporters, importers, and investors. While the resulting tariff levels remain meaningful, the restoration of improved predictability itself is a material improvement.
Equally important is the way the framework reconnects economic engagement with strategic alignment. The United States has made clear that trade treatment is being evaluated alongside energy, defense, and geopolitical considerations. India appears willing to situate trade discussions within that broader strategic context. This reflects the reality of contemporary trade policy where economic outcomes are increasingly shaped by national security and foreign policy considerations. Unsurprisingly, this is one of the key themes that runs throughout the joint statement between the two countries.
Perhaps the most encouraging element of the framework is its emphasis on technology. The explicit focus on advanced technology products, data center infrastructure, and high-end compute signals a shared understanding that the future of the bilateral relationship will be defined in large part by digital infrastructure, artificial intelligence, and secure supply chains. This is a meaningful shift from earlier trade dialogues that were often dominated by traditional market access disputes.
There are additional signs that suggest a more pragmatic approach by both sides. The attention to non-tariff barriers, including standards conformity assessment and licensing practices, acknowledges that many of the most significant trade frictions today operate outside formal tariff schedules. Progress in these areas could yield practical benefits if implemented with discipline.
The reintroduction of digital trade principles is also notable. Embedding this discussion within a broader trade framework may provide a more durable foundation, particularly as data-driven services and cross-border digital activity become central to both economies.
At the same time, caution is warranted given how many questions remain unanswered. Many of the most consequential details remain unclarified. Questions remain about the durability of the new tariff structure, the scope of rules of origin, the mechanisms for enforcement and dispute resolution, and the treatment of sensitive sectors such as pharmaceuticals, agriculture, and digital services.
Moreover, questions persist around the role of India's Russian oil imports, the singular factor that prompted Trump to impose an additional 25% punitive tariff on India last year.
The move underscored India's voracious energy security needs, highlighted the ongoing salience of its sacrosanct "strategic autonomy," and resurrected memories and accompanying distrust from decades past when the United States had imposed sanctions on India over its nuclear weapons program.
The most recent tariff regime was justified by Washington on the grounds that India was directly or indirectly importing Russian crude in a manner inconsistent with the United States sanctions objectives. That determination formed the legal basis for the additional duties under the national emergency authorities invoked by the White House.
The decision to lift the 25 per cent duty therefore turns on a critical and unresolved asymmetry. The governing Executive Order states that India has committed to cease such imports and to realign its energy purchases toward the United States. India has not publicly affirmed that position in comparable terms. The result is not a settled understanding but a conditional accommodation.
That conditionality is explicit in the order itself. The administration has preserved a monitoring regime under which the Commerce Department is tasked with assessing whether India resumes Russian oil imports as defined under prior orders. If it does, Trump retains full authority to reimpose the tariff.
Put simply, the relief is meaningful, but it is neither permanent nor unconditional.
Ultimately, implementation of the trade agreement will be the decisive barometer. Regulatory coordination, standards recognition, and the reduction of non-tariff barriers require sustained engagement well beyond the initial announcement. Progress in these areas can oftentimes be uneven and will be dependent on continued political support.
Taken together, the interim framework should be viewed as a necessary and welcome reset. It lowers the temperature, restores a measure of predictability to bilateral relations, and signals renewed intent to align economic policy with the broader strategic partnership.
After a year in which the relationship faced significant strain, that alone is meaningful progress. The framework portends encouraging trendlines, but it also leaves substantial work ahead.
Managing that balance will continue to be the key task for leaders in both countries.
(Ronak D Desai is Visiting Fellow at the Hoover Institution at Stanford University. He leads the India practice at the global law firm of Paul Hastings LLP, and serves on the Global Board of Directors at the U.S.-India Business Council (USIBC).)
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