Quick take: India-US trade relations remain one of the most important bilateral economic partnerships in the world, but they have become more complex and contested in 2025-2026 due to tariffs, shifting trade balances, and ongoing negotiations for a formal trade agreement. Here's the analysis as of September 2026.

Current Scale of Bilateral Trade

  • Goods trade (2025): Approximately $149-150 billion
    • US imports from India: ~$103-104 billion
    • US exports to India: ~$45-46 billion
    • US goods trade deficit with India: ~$58 billion
  • Services trade: Around $90-92 billion, with India holding a modest surplus.
  • Total goods + services: Crossed $240 billion in 2025 — a record high.

In FY 2025-26 (Indian fiscal year), India's exports to the US grew only marginally (~0.9% to about $87 billion), while imports from the US rose sharply (~17% to around $53-54 billion). As a result, India's trade surplus with the US narrowed significantly (from ~$41 billion to ~$34 billion).

Key Features of the Relationship — Strengths

  • The US is India's largest export market (accounting for nearly 20% of India's goods exports).
  • Strong complementarity in pharmaceuticals (India is a major supplier of generics), IT/services, gems & jewellery, textiles, engineering goods, and chemicals.
  • Growing energy trade: India has sharply increased purchases of US crude oil and LNG.
  • Strategic alignment on technology, critical minerals, supply-chain diversification away from China, and defence.

Points of Friction

  • Persistent US concern over the large goods trade deficit with India.
  • High US tariffs imposed in 2025 (at one point reaching 50% on some Indian goods, linked partly to India's purchases of Russian oil).
  • Non-tariff barriers, agricultural market access, digital trade rules, and intellectual property issues.
  • India's relatively high tariffs on certain US industrial and farm products.

Tariff Landscape in 2026

After legal and policy changes in the US (including Supreme Court rulings that struck down some emergency tariffs), the current structure includes:

  • A broad 10% Section 301 tariff on most Indian goods (lower than the 12.5% applied to many other countries, including China). This rate was granted partly because India strengthened rules against imports made with forced labour. See our full country-wise tariff guide.
  • Higher sector-specific duties still apply on steel, aluminium, automobiles/parts, and certain other products.
  • Recent additional tariffs (e.g., up to 100% on certain foreign drones) affect specific categories but are not India-specific.

India currently enjoys a relative tariff advantage compared with several competing Asian exporters that face 12.5%.

Ongoing Trade Negotiations

In February 2026, India and the US announced a framework for an Interim Trade Agreement (ITA). Key elements discussed include:

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  • Reduction of US reciprocal tariffs on Indian goods.
  • Indian tariff cuts or improved access for US industrial goods, agricultural products, and medical devices.
  • Indian commitment to purchase substantial volumes of US energy, aircraft, metals, and technology (reports mention a possible $500 billion over five years).
  • Progress on non-tariff barriers and digital trade issues.

Talks continue, but a comprehensive Bilateral Trade Agreement (BTA) remains unfinished. Both sides have expressed interest in concluding a deal, yet domestic political sensitivities (especially in Indian agriculture) and US demands for greater market access have slowed finalisation.

Structural Shifts Visible in 2025-26

  1. Narrowing Indian surplus — Driven more by rising Indian imports of US energy and goods than by a collapse in Indian exports.
  2. Energy becoming a bigger pillar — US crude and LNG exports to India have grown rapidly.
  3. Resilience of Indian exports — Despite tariff shocks, overall export volumes to the US held up better than many expected, particularly in pharmaceuticals and certain manufactured goods.
  4. Diversification efforts — India is simultaneously deepening trade ties with the EU, UK, and others as a hedge against US policy volatility.

Outlook

India-US trade relations are in a transitional phase. The partnership is strategically important for both countries in the context of competition with China and Indo-Pacific supply-chain realignment. However, the relationship is no longer characterised by steadily rising Indian surpluses and relatively open US market access.

Future trajectory will depend on:

  • Whether the interim or full trade agreement is concluded.
  • How the US applies existing and future tariffs.
  • India's willingness to open sensitive sectors.
  • Continued growth in energy, technology, and defence-related trade.

NRI & Indian-Business Implications

For NRIs and Indian businesses, the environment rewards:

  • Careful monitoring of tariff changes — rates and exemptions shift regularly
  • Market diversification — hedge across US, EU, UK, UAE, ASEAN
  • Closer attention to the evolving bilateral framework — an interim deal could reshape sector-level competitiveness overnight
  • Investment portfolio calibration — Indian pharma, IT, energy-exposed firms have different tariff-risk profiles
  • Cross-border tax planning — see our NRI Taxation India pillar for treaty implications

Overall Assessment

The economic relationship remains robust and strategically valuable, but it has become more transactional and contested. Both sides have strong incentives to stabilise and expand it, yet meaningful liberalisation will require difficult political compromises on both sides.

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