Introduction to India-US Trade Relations in the US 2026
The economic relationship between India and the United States has reached unprecedented heights, marking a transformative period in bilateral trade cooperation. The India-US trade deal announced on February 2, 2026, represents a watershed moment in international commerce, with President Donald Trump and Prime Minister Narendra Modi finalizing an agreement that reduces reciprocal tariffs from 50 percent to 18 percent. This historic accord comes after months of intensive negotiations and addresses critical issues including energy security, Russian oil imports, and market access barriers that had strained relations between the world’s two largest democracies.
The agreement extends far beyond simple tariff reductions, encompassing a comprehensive framework for economic integration. India has committed to purchasing over $500 billion worth of American products across energy, technology, agriculture, and coal sectors, while simultaneously agreeing to cease Russian oil purchases and redirect procurement toward the United States and potentially Venezuela. The deal positions both nations for enhanced supply chain integration, technological collaboration, and strategic economic partnership that could reshape global trade patterns. With bilateral trade between India and the US reaching $132.2 billion in FY 2024-25, this agreement sets the stage for achieving the ambitious target of $500 billion by 2030, demonstrating the enormous potential for growth in this critical relationship.
Key India-US Trade Deal Facts and Statistics in the US 2026
| Trade Fact | Value/Detail | Year |
|---|---|---|
| New US Tariff Rate on Indian Goods | 18 percent | 2026 |
| Previous Combined Tariff Rate | 50 percent (25% reciprocal + 25% penalty) | 2025-2026 |
| Tariff Reduction Percentage | 64 percent reduction (from 50% to 18%) | 2026 |
| Total Bilateral Trade Volume | $132.2 billion | FY 2024-25 |
| India’s Exports to US | $86.51 billion | FY 2024-25 |
| India’s Imports from US | $45.6 billion | FY 2024-25 |
| India’s Trade Surplus with US | $40.82 billion | FY 2024-25 |
| India’s Commitment to US Purchases | Over $500 billion | Agreement 2026 |
| Target Bilateral Trade by 2030 | $500 billion | 2030 Goal |
| Export Growth Rate (Apr-Nov 2025) | 11.38 percent increase | 2025 |
| US Rank as India’s Trading Partner | Number 1 | 2024-25 |
| Indian Commodities Exported to US | 7,174 different products | FY 2024-25 |
Data Source: US Department of Commerce, US Census Bureau, Ministry of Commerce and Industry (India), CNBC, Business Standard
The India-US trade deal statistics reveal remarkable momentum in bilateral commerce despite previous tariff challenges. The reduction from 50 percent to 18 percent represents a 64 percent decrease in the overall tariff burden, providing immediate relief to Indian exporters across multiple sectors. India’s merchandise exports to the United States reached $86.51 billion in FY 2024-25, reflecting an 11.6 percent increase over the previous fiscal year and demonstrating resilient demand for Indian products even during periods of trade tension. The $40.82 billion trade surplus that India maintains with the United States underscores the complementary nature of both economies, with American consumers and businesses demonstrating strong preference for Indian pharmaceuticals, textiles, electronics, gems and jewelry, and engineering goods.
Bilateral Trade Volume Between India and the US 2026
| Metric | FY 2024-25 | FY 2023-24 | Growth Rate |
|---|---|---|---|
| Total Bilateral Trade | $132.2 billion | $119.71 billion | 10.43% |
| India’s Exports to US | $86.51 billion | $77.51 billion | 11.6% |
| India’s Imports from US | $45.6 billion | $42.2 billion | 8.06% |
| Trade Surplus (India) | $40.82 billion | $35.32 billion | 15.57% |
| Services Trade Exports (India) | $270.06 billion (Apr-Nov 2025) | $248.56 billion (Apr-Nov 2024) | 8.65% |
| Services Trade Surplus | $134.13 billion (Apr-Nov 2025) | $116.35 billion (Apr-Nov 2024) | 15.28% |
Data Source: Ministry of Commerce and Industry (India), US Census Bureau, India Briefing
Bilateral trade volume between India and the United States in 2026 has demonstrated exceptional resilience and growth despite global economic uncertainties and tariff-related headwinds. The total bilateral trade reaching $132.2 billion in FY 2024-25 represents a substantial 10.43 percent increase from the previous fiscal year’s $119.71 billion, reinforcing the United States’ position as India’s largest trading partner. The $86.51 billion in exports from India to the United States during FY 2024-25 reflects an impressive 11.6 percent year-over-year growth, driven by strong American demand for Indian pharmaceuticals, electronics, gems and jewelry, textiles, and engineering goods. The services trade component adds another dimension to this relationship, with India’s services exports estimated at $270.06 billion for April-November 2025, creating a combined services trade surplus of $134.13 billion.
India’s Export Categories to the US 2026
| Export Category | Export Value | Share of Total Exports | Growth Rate |
|---|---|---|---|
| Engineering Goods | $116 billion | 26.88% | 5.86% |
| Petroleum Products | $60.07 billion | 13.86% | 4.2% |
| Pharmaceuticals | $8.1-10.9 billion | 9.4-12.6% | 7.31% |
| Gems and Jewelry | $7.8-8.5 billion | 9.0-9.8% | 3.5% |
| Electronics | $5.51 billion (increase) | 8.2% | 40.63% |
| Textiles and Apparel | $6.77-7.2 billion | 7.8-8.3% | 5.78% |
| Organic Chemicals | $4.8-5.2 billion | 5.5-6.0% | 1.08% |
| Iron and Steel | $2.7-2.8 billion | 3.1-3.2% | Marginal |
Data Source: Ministry of Commerce and Industry, Overseas Logistics, India Briefing
India’s export categories to the United States in 2026 reveal a sophisticated and diversified trade portfolio. Engineering goods lead the export basket with an impressive $116 billion, accounting for 26.88 percent of total exports and registering steady growth of 5.86 percent. Electronics emerged as the fastest-growing export category with a spectacular 40.63 percent growth rate, adding $5.51 billion in exports during April-August 2025. This surge is primarily driven by smartphone manufacturing, with total electronics exports crossing $17 billion in FY 2024-25, propelled by Production Linked Incentive (PLI) schemes and Apple’s expanded manufacturing operations in India. Pharmaceuticals remain a cornerstone with exports valued between $8.1 billion and $10.9 billion, solidifying India’s position as the “pharmacy of the world.”
US Tariff Structure on Indian Goods in the US 2026
| Tariff Period | Reciprocal Tariff Rate | Penalty Tariff | Combined Total Rate | Effective Date |
|---|---|---|---|---|
| Pre-August 2025 | 0-10% (varied by product) | None | Varied | Before Aug 2025 |
| Aug 2025 – Feb 2, 2026 | 25 percent | 25 percent | 50 percent | Aug 2025 – Feb 2026 |
| Post Trade Deal | 18 percent | Rescinded | 18 percent | Feb 2, 2026 – Present |
| Pakistan (Comparison) | 19 percent | None | 19 percent | 2026 |
| Vietnam (Comparison) | 20 percent | None | 20 percent | 2026 |
Data Source: CNBC, Al Jazeera, Business Standard, White House Official Statement
The US tariff structure on Indian goods in 2026 has undergone dramatic transformation following the February trade deal announcement. In August 2025, President Trump imposed a punitive 25 percent reciprocal tariff plus an extra 25 percent penalty tariff specifically targeting India’s Russian oil purchases, bringing the combined tariff rate to 50 percent. The February 2, 2026 trade deal brought immediate relief, reducing the tariff rate to 18 percent through the rescission of the penalty tariff and lowering the reciprocal tariff from 25 percent to 18 percent. This 18 percent rate is now more favorable than the 19 percent imposed on Pakistan and the 20 percent rates applied to Vietnam and Bangladesh.
India’s Commitments Under the US Trade Deal 2026
| Commitment Category | Commitment Value/Details | Strategic Significance |
|---|---|---|
| Total US Product Purchases | Over $500 billion | Addresses trade imbalance |
| Russian Oil Purchases | Complete cessation | Geopolitical alignment |
| US/Venezuela Oil Purchases | Replacement of Russian supply | Supply chain reorientation |
| Agricultural Product Imports | Bourbon, motorcycles, others | Market access expansion |
| Defense Equipment | Multi-billion dollar purchases | Strategic partnership |
| Tariff Reduction (India’s side) | Move toward ZERO on US goods | Reciprocal market opening |
| LPG Imports | 2.2 million tons in 2026 | Energy diversification |
Data Source: President Trump Truth Social Post, Prime Minister Modi X Statement, Business Today
India’s commitments under the 2026 US trade deal represent a comprehensive package addressing longstanding American concerns. The headline commitment of purchasing over $500 billion worth of American products spans energy, technology, agricultural products, and defense equipment. The immediate cessation of Russian oil purchases constitutes perhaps the most politically sensitive commitment, as India had been importing approximately 1.5 million barrels per day of discounted Russian crude. State-run refiners have already signed their first long-term deal to import 2.2 million tons of liquefied petroleum gas from the United States in 2026. The agreement to reduce Indian tariffs to ZERO on American products represents a dramatic policy shift.
Sectoral Impact of India-US Tariff Reduction in the US 2026
| Sector | Impact of 18% Tariff | Key Beneficiaries | Expected Growth |
|---|---|---|---|
| Pharmaceuticals | Improved margins | Generic drug manufacturers | 7-10% annually |
| Electronics | Supply chain boost | Smartphone manufacturers | 35-40% growth |
| Textiles | Enhanced competitiveness | Garment manufacturers | 5-8% growth |
| Engineering Goods | Export momentum | Auto component makers | 5-7% growth |
| Gems and Jewelry | Reduced cost burden | Diamond processors | 3-5% growth |
| Marine Products | Cost competitiveness | Shrimp exporters | 10-12% growth |
Data Source: India Briefing, Business Today, Atlantic Council Analysis
The sectoral impact of the India-US tariff reduction to 18 percent creates differentiated opportunities across India’s export portfolio. The pharmaceutical sector, which exported between $8.1 billion and $10.9 billion, benefits from improved profit margins as the reduced tariff burden enhances cost competitiveness. The electronics sector emerges as the biggest winner, having already demonstrated explosive 40.63 percent growth even before the tariff reduction, with exports over $17 billion in FY 2024-25 positioned for 35 to 40 percent annual growth. Textiles and apparel, with $6.77 to $7.2 billion in exports, gain competitiveness against competitors like Bangladesh and Vietnam facing 20 percent tariffs.
US Exports to India by Category in the US 2026
| US Export Category | Export Value to India | Share of Total | Key Products |
|---|---|---|---|
| Mineral Fuels/Energy | $14.3+ billion | 31.4% | Crude oil, LNG, petroleum products |
| Machinery | $4.5-5.0 billion | 9.9-11.0% | Industrial machinery, construction equipment |
| Electrical Equipment | $3.0-3.5 billion | 6.6-7.7% | Semiconductors, electronics components |
| Aircraft and Parts | $3.5-4.0 billion | 7.7-8.8% | Commercial aircraft, aircraft parts |
| Defense Equipment | $2.8-3.5 billion | 6.1-7.7% | Military systems, weapons |
| Agricultural Products | $2.0-2.5 billion | 4.4-5.5% | Tree nuts, soybeans, fruits |
Data Source: India Briefing, US Department of Commerce
US exports to India in 2026 demonstrate India’s strategic shift toward high-value industrial inputs. Mineral fuels and energy products dominate with over $14.3 billion, accounting for nearly one-third of total imports, including crude oil, LNG, petroleum products, and petrochemicals supporting India’s energy diversification. Machinery and electrical equipment collectively exceed $7.8 billion, driven by India’s Production Linked Incentive schemes in electronics and semiconductor manufacturing. The aircraft sector, valued at $3.5 to $4.0 billion, reflects India’s booming aviation market growing at approximately 16 percent annually, with plans to procure approximately 1,000 commercial aircraft.
Investment and FDI Flows Between India and the US 2026
| Investment Metric | Value | Period | Sector Focus |
|---|---|---|---|
| US FDI in India (Cumulative) | $70.65 billion | April 2000 – March 2025 | Tech, manufacturing, services |
| US FDI Rank in India | 3rd largest investor | 2025 | Multiple sectors |
| Indian Companies’ US Investment | Over $40 billion | Cumulative as of 2023 | IT, pharma, manufacturing |
| Jobs Created by Indian Companies | Over 425,000 direct jobs | As of 2023 | Services, manufacturing |
| Number of Indian Companies in US | 163 companies | 2023 | Diversified sectors |
Data Source: IBEF, CII Study, US Department of Commerce
Investment flows between India and the United States reflect deepening economic integration. The United States ranks as India’s third-largest investor with cumulative FDI of $70.65 billion from April 2000 through March 2025, concentrated in technology services, advanced manufacturing, and financial services. 163 Indian companies have invested over $40 billion in the United States and created more than 425,000 direct jobs. Indian IT services giants including Tata Consultancy Services, Infosys, and Wipro maintain extensive US operations, while pharmaceutical companies operate manufacturing facilities across the United States.
Future Outlook for India-US Trade Relations in the US 2026 and Beyond
| Projection Metric | 2026 Estimate | 2027 Target | 2030 Goal |
|---|---|---|---|
| Bilateral Trade Volume | $145-155 billion | $180-200 billion | $500 billion |
| India’s Exports to US | $95-100 billion | $110-120 billion | $250 billion |
| Electronics Exports | $22-25 billion | $35-40 billion | $80-100 billion |
| Pharmaceutical Exports | $11-13 billion | $14-16 billion | $25-30 billion |
| Defense Trade | $5-6 billion | $8-10 billion | $20-25 billion |
Data Source: PHDCCI Projections, Economic Survey 2025-26
The future outlook for India-US trade relations points toward sustained expansion. Industry projections suggest bilateral trade could reach $300 billion by 2026-27, building on the current foundation of $132.2 billion. The joint target of $500 billion by 2030 appears achievable if both governments successfully implement the Bilateral Trade Agreement. Electronics manufacturing represents the highest-growth frontier, with PLI schemes driving rapid expansion. Apple’s deepening commitment to Indian manufacturing, currently producing iPhones worth over $17 billion annually, signals broader trends. Indian electronics exports to the US could reach $22 to $25 billion in 2026, growing to $80 to $100 billion by 2030. Defense trade could accelerate from $5 to $6 billion currently toward $20 to $25 billion by 2030 as India diversifies military procurement away from Russian suppliers.
State-Level India-US Trade Dynamics in the US 2026
| US State | Imports from India | Primary Import Categories | Share of Total |
|---|---|---|---|
| New York | $14.1 billion | Gems, jewelry, pharmaceuticals | 16.3% |
| New Jersey | $10.1 billion | Pharmaceuticals, chemicals | 11.7% |
| California | $7.6 billion | Technology hardware, machinery | 8.8% |
| Texas | $7.4 billion | Refined petroleum, machinery | 8.6% |
| Illinois | $4.8-5.2 billion | Machinery, electronics | 5.5-6.0% |
Data Source: India Briefing, State Commerce Departments, US Census Bureau
State-level trade dynamics between India and the United States in 2026 reveal highly concentrated commercial relationships, with the top ten states accounting for approximately two-thirds of total bilateral trade flows. New York leads as India’s primary gateway to the American market with $14.1 billion in imports, representing 16.3 percent of total trade, driven predominantly by the gems and jewelry trade centered in Manhattan’s diamond district, along with substantial pharmaceutical imports serving the tri-state area’s massive healthcare sector. New Jersey ranks second with $10.1 billion in imports, accounting for 11.7 percent of total trade, functioning as a critical pharmaceutical and chemical import hub. California and Texas, each importing approximately $7.4 to $7.6 billion worth of Indian goods, represent 8.6 to 8.8 percent of trade respectively, with California serving as the technology and electronics import hub benefiting from Silicon Valley’s tech ecosystem, while Texas functions as the energy and industrial machinery import center.
Challenges and Risks to India-US Trade Growth in the US 2026
| Challenge Category | Specific Issues | Impact Level | Timeline to Resolution |
|---|---|---|---|
| Tariff Uncertainty | Lack of formal Federal Register notice | High | Weeks to months |
| Implementation Details | Vague terms, no specific timelines | High | Months to 1 year |
| Agricultural Barriers | SPS measures, market access restrictions | Medium-High | 1-2 years |
| Intellectual Property | Patent concerns, trade secret protection | Medium | Ongoing |
| Russian Oil Commitment | Verification questions | Medium-High | Immediate-ongoing |
| $500B Purchase Target | Feasibility unclear | High | Multi-year |
Data Source: Atlantic Council, Peterson Institute, Congressional Research Service
Challenges and risks to sustained India-US trade growth in 2026 remain substantial despite the landmark tariff reduction agreement. Legal and procedural uncertainties top the list, as trade experts note that deals become “official once the Federal Register notice is posted with dates, times and applicable tariff codes” – procedural requirements that had not been completed as of early February 2026. Most deals that President Trump has struck remain frameworks with few concrete details and uncertain implementation timelines. The $500 billion procurement commitment faces significant feasibility concerns, with analysts calling it “kind of a stretch” given current trade patterns. India’s commitment to completely cease Russian oil purchases remains particularly contentious, as Russia supplies over one-third of India’s oil imports at substantial discounts. Agricultural sector barriers persist, with the US Trade Representative identifying India’s agricultural subsidies and sanitary/phytosanitary measures as significant constraints. Intellectual property concerns continue, with India remaining on the Priority Watch List due to inconsistent progress in strengthening IP protections.
Trade Agreement Implementation Timeline in the US 2026
| Implementation Phase | Actions Required | Responsible Parties | Target Completion |
|---|---|---|---|
| Immediate (Feb 2026) | Tariff reduction to 18% | US Customs, USTR | Completed |
| Short-term (Q1-Q2 2026) | Federal Register publication | White House, USTR | March 2026 |
| Medium-term (2026) | BTA first tranche negotiation | Both governments | Fall 2026 |
| Ongoing (2026-2027) | Russian oil replacement | Indian refiners | 2026-2027 |
| Long-term (2026-2030) | $500B procurement implementation | Multiple agencies | 2026-2030 |
| Long-term (2026-2030) | Zero tariff achievement | Both governments | 2028-2030 |
Data Source: White House Statements, Ministry of Commerce, Trade Analysis
The trade agreement implementation timeline for the India-US deal in 2026 follows a phased approach with immediate, short-term, and long-term components. The immediate phase beginning February 2, 2026, delivered the tariff reduction from 50 percent to 18 percent and rescinded the 25 percent penalty on Russian oil purchases. This provided instant relief to Indian exporters and American importers. The short-term phase covering Q1-Q2 2026 requires formal Federal Register publication with specific dates, tariff codes, and implementation procedures to provide legal certainty to businesses. The medium-term phase throughout 2026 focuses on negotiating the “first tranche” of the comprehensive Bilateral Trade Agreement by fall 2026, as committed by both leaders. This involves increasing market access, reducing tariff and non-tariff barriers, and deepening supply chain integration across sectors. The ongoing phase addresses India’s commitment to cease Russian oil purchases and redirect procurement toward American and Venezuelan sources, requiring coordination between Indian state-run and private refiners, American energy exporters, and Venezuelan suppliers. The long-term phase spanning 2026 through 2030 implements India’s $500 billion procurement commitment across energy, technology, agriculture, defense, and other sectors, requiring multi-year contracts, financing arrangements, and delivery schedules. Achieving zero tariff status on US goods entering India represents the most ambitious long-term goal, requiring India to dismantle protective barriers in sensitive sectors like agriculture and automotive while managing domestic political opposition.
Comparison with Other Major US Trade Agreements in the US 2026
| Trade Partner | Tariff Rate | Trade Volume | Agreement Type | Key Sectors |
|---|---|---|---|---|
| India | 18 percent | $132.2 billion | Bilateral framework | Pharma, electronics, textiles |
| Pakistan | 19 percent | $8-10 billion | Reciprocal tariff | Textiles, agriculture |
| Vietnam | 20 percent | $120+ billion | Reciprocal tariff | Electronics, apparel |
| Bangladesh | 20 percent | $12-15 billion | Reciprocal tariff | Textiles, garments |
| European Union | Variable (0-25%) | $800+ billion | FTA (India-EU) | Multiple sectors |
Data Source: USTR, US Census Bureau, International Trade Administration
Comparison with other major US trade agreements in 2026 reveals India’s relatively favorable position following the tariff reduction. India’s 18 percent tariff rate is lower than the 19 percent applied to Pakistan and the 20 percent rates for Vietnam and Bangladesh, providing Indian exporters with a competitive advantage in the American market. Vietnam, despite facing a 20 percent tariff, maintains bilateral trade exceeding $120 billion with the United States, demonstrating that even with higher tariffs, strong manufacturing capabilities and supply chain integration can sustain substantial trade volumes. India’s $132.2 billion in bilateral trade positions it among America’s top trading partners globally, though still significantly below the European Union’s $800+ billion or China’s trade volumes. The recent India-EU free trade agreement creates an interesting dynamic, as Indian exporters can now access both major Western markets under preferential terms, though the US 18 percent tariff remains higher than the near-zero rates under the India-EU FTA for most products.
Disclaimer: The data research report we present here is based on information found from various sources. We are not liable for any financial loss, errors, or damages of any kind that may result from the use of the information herein. We acknowledge that though we try to report accurately, we cannot verify the absolute facts of everything that has been represented.
