After months of tough negotiations, India and the United States have reached a major breakthrough in their trade relationship. The two sides have finalised a deal that sharply reduces US tariffs on Indian imports to 18%. Earlier, the US had raised these tariffs to as high as 50% in August 2025.

People aware of the development told HT that the agreement does more than just cut tariffs. It also keeps Indian dairy products and other “sensitive” agricultural items outside the scope of the deal.

Zero-Duty Access for Some Indian Goods

As part of the agreement, Indian goods worth about $10 billion may enter the US market at zero duty. This provision appears under the US’ Annexure III, known as Potential Tariff Adjustments for Aligned Partners (PTAAP).

According to an earlier HT report, nearly 2,000 products qualify for reduced or zero duties under PTAAP. These include items from sectors such as natural resources, coffee, tea, fruits like bananas and oranges, tomatoes, and fruit juices.

Officials said the US already does not charge tariffs on these items for any country.

Tariffs Cut to 18%

Both Prime Minister Narendra Modi and US President Donald Trump have confirmed the trade deal. Under the agreement, Indian exports to the US will now face a tariff rate of 18%.

This figure emerged after two changes. First, the US removed the 25% additional penalties it had imposed on India over its oil trade with Russia. Second, it reduced reciprocal tariffs from 25% to 18%.

Claim of $500 Billion Purchases From the US

President Trump has also claimed that India has agreed to buy American goods worth more than $500 billion under the new deal. These purchases reportedly include energy and other key products.

However, Indian authorities have not shared any official details or confirmation on this claim so far.

Zero Tariffs on US Goods?

After the deal was announced, US Trade Representative Jamieson Greer said in a post on X that India would cut tariffs on several American agricultural and industrial products to 0%.

Indian officials, however, have not confirmed this statement yet. The extent and scope of such tariff reductions remain unclear from India’s side.

India-Russia Oil Trade Still Unclear

India has also not confirmed another key claim made by Trump. He said Prime Minister Modi had agreed to end India’s oil trade with Russia.

Earlier, this energy trade was cited as the reason why the US doubled tariffs on Indian goods to 50% in August 2025. For now, New Delhi has remained silent on whether any change has been agreed on this front.

India Protects Agriculture and Dairy

Union Commerce and Industry Minister Piyush Goyal has made it clear that India protected its sensitive agriculture and dairy sectors during the negotiations. He said these sectors were safeguarded in the final agreement.

At the same time, he noted that the deal would help labour-intensive and export-oriented sectors in India. Jamieson Greer also acknowledged this point. In an interview with CNBC, he said India was protecting its agricultural goods.

What the Deal Means Going Ahead

Overall, the trade agreement signals a reset in India-US economic ties. It lowers tariffs, opens limited zero-duty access, and boosts key export sectors. At the same time, India has drawn firm lines around agriculture and dairy, keeping politically and economically sensitive areas protected.