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3 Feb 2026·Source: The Indian Express
3 min
International RelationsEconomyNEWS

India and US strike trade deal: Tariffs reduced to 18%

India and US reach trade agreement, slashing tariffs to 18% on some goods.

India and US strike trade deal: Tariffs reduced to 18%

Photo by Markus Winkler

India and the US have reached a trade deal that includes reducing tariffs from 50% to 18% on certain products. This agreement aims to boost trade relations between the two countries. The deal also addresses India's concerns about market access for its goods in the US. The agreement could lead to increased trade volume and economic benefits for both nations.

Key Facts

1.

Tariffs reduced: 50% to 18%

2.

Deal: India and US

UPSC Exam Angles

1.

GS Paper 2: International Relations, Bilateral Agreements

2.

Connects to India's Foreign Trade Policy and its impact on the economy

3.

Potential for statement-based questions on trade agreements and their implications

Visual Insights

India-US Trade Deal: Tariff Reduction

Key statistic from the India-US trade deal regarding tariff reduction.

Tariff Reduction
18%-32%

Reduction in tariffs from 50% to 18% is expected to boost trade and economic relations between India and the US. This could lead to increased market access for Indian goods in the US.

More Information

Background

The trade relationship between India and the US has evolved significantly over time. Initially, trade was limited, but with India's economic liberalization in the 1990s, it began to expand. Key milestones include the establishment of the World Trade Organization (WTO), which provided a framework for international trade, and various bilateral agreements aimed at reducing trade barriers. The General Agreement on Tariffs and Trade (GATT), the precursor to the WTO, laid the foundation for these developments. Over the years, several factors have influenced the trade dynamics between the two countries. These include changes in economic policies, technological advancements, and geopolitical considerations. The rise of India as a major economic power has led to increased trade and investment flows. The Most Favored Nation (MFN) principle, a cornerstone of the WTO, has played a role in shaping trade relations. However, both countries have also faced challenges, such as trade disputes and concerns about market access. The legal and constitutional framework governing trade in India includes various acts and regulations. The Foreign Trade (Development and Regulation) Act, 1992 provides the legal basis for India's foreign trade policy. The Constitution of India empowers the government to enter into international treaties and agreements, including trade agreements. These agreements are subject to parliamentary scrutiny and must be consistent with the Constitution.

Latest Developments

Recent years have seen increased efforts to strengthen trade ties between India and the US. The two countries have engaged in negotiations to address trade imbalances and resolve outstanding issues. The Trade Policy Forum (TPF) serves as a platform for dialogue and cooperation. The US has raised concerns about market access for its agricultural products and intellectual property rights in India. There are ongoing debates about the impact of trade policies on domestic industries and employment. Some stakeholders argue that increased trade liberalization can lead to job losses and harm local businesses. Others contend that it can boost economic growth and create new opportunities. Institutions like NITI Aayog play a crucial role in analyzing the economic impact of trade agreements and formulating policy recommendations. The future outlook for India-US trade relations is positive, with both countries expressing a desire to deepen cooperation. The focus is on identifying new areas of collaboration, such as digital trade and clean energy. The goal is to create a more balanced and mutually beneficial trade relationship. The upcoming milestones include further rounds of negotiations and the implementation of agreed-upon measures.

Frequently Asked Questions

1. What are the key facts about the India-US trade deal for UPSC Prelims?

The key fact is the reduction of tariffs from 50% to 18% on certain products as part of a trade agreement between India and the US. Remember the original and new tariff percentages for the exam.

Exam Tip

Focus on the percentage change in tariffs. Questions often test your recall of specific numbers.

2. Why is this India-US trade deal in the news recently?

This trade deal is in the news because India and the US have reached an agreement to reduce tariffs on certain products, aiming to boost trade relations between the two countries.

3. What is the main aim of this trade agreement between India and the US?

The main aim is to boost trade relations between India and the US by reducing tariffs and addressing market access concerns for both nations. This could lead to increased trade volume and economic benefits.

4. How might this trade deal impact common citizens in India and the US?

Potentially, this deal could lead to lower prices on some imported goods due to reduced tariffs. It might also create more trade and business opportunities, which could lead to job creation in the long run.

5. What is the historical background of trade relations between India and the US?

Initially, trade was limited, but with India's economic liberalization in the 1990s, it began to expand. Key milestones include the establishment of the World Trade Organization (WTO) and various bilateral agreements aimed at reducing trade barriers.

6. What are the recent developments in India-US trade relations?

Recent years have seen increased efforts to strengthen trade ties. The two countries have engaged in negotiations to address trade imbalances and resolve outstanding issues. The Trade Policy Forum (TPF) serves as a platform for dialogue and cooperation.

7. What are tariffs, and why are they important in international trade?

Tariffs are taxes imposed on imported goods. They are important because they can affect the price of goods, protect domestic industries, and influence trade balances between countries. In this case, tariffs were reduced from 50% to 18%.

8. What are the potential pros and cons of this trade deal between India and the US?

Pros include increased trade volume, economic benefits for both nations, and potentially lower prices for consumers. Cons might include increased competition for domestic industries and potential trade imbalances if not managed carefully.

9. What is the Trade Policy Forum (TPF) mentioned in the context of India-US trade relations?

The Trade Policy Forum (TPF) serves as a platform for dialogue and cooperation between India and the US to address trade imbalances and resolve outstanding issues.

10. Regarding the India-US trade deal, what specific reforms are needed to further improve trade relations?

Based on available information, reforms could focus on addressing market access for agricultural products, protecting intellectual property rights, and further reducing trade barriers to facilitate smoother trade flows between the two countries.

Practice Questions (MCQs)

1. Consider the following statements regarding the recent trade deal between India and the US: 1. The trade deal involves reducing tariffs on certain products from 50% to 18%. 2. The agreement solely focuses on addressing US concerns about market access in India. Which of the statements given above is/are correct?

  • A.1 only
  • B.2 only
  • C.Both 1 and 2
  • D.Neither 1 nor 2
Show Answer

Answer: A

Statement 1 is CORRECT: The news explicitly states that the trade deal includes reducing tariffs from 50% to 18% on certain products. Statement 2 is INCORRECT: The agreement addresses India's concerns about market access in the US, not solely US concerns in India. Therefore, only statement 1 is correct.

2. Which of the following principles is a cornerstone of the World Trade Organization (WTO) and has influenced trade relations between India and the US?

  • A.Absolute Advantage
  • B.Comparative Advantage
  • C.Most Favored Nation (MFN)
  • D.Protectionism
Show Answer

Answer: C

The Most Favored Nation (MFN) principle is a cornerstone of the WTO. It requires countries to provide any concessions, privileges, or immunities granted to one trading partner to all other WTO members. This principle has significantly influenced trade relations between India and the US by ensuring non-discriminatory treatment.

3. In the context of international trade, what is the primary objective of reducing tariffs between countries?

  • A.To increase government revenue
  • B.To protect domestic industries from foreign competition
  • C.To promote free trade and increase trade volume
  • D.To impose trade barriers
Show Answer

Answer: C

The primary objective of reducing tariffs is to promote free trade and increase trade volume between countries. Lower tariffs make imported goods more affordable, leading to increased demand and trade. While protecting domestic industries can be a consideration, it is not the primary goal of tariff reduction.

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