India to finalise US trade deal after securing preferential tariff terms: Piyush Goyal
The Ministry of Commerce and Industry stated that a proposed Bilateral Trade Agreement (BTA) with the United States would be finalised only once Washington offers India tariff terms that are preferential compared with those given to competing exporting nations
The statement was made at a national workshop on leveraging Free Trade Agreements, held in New Delhi
Drafting of the BTA text is reported to be largely complete, with the remaining gap being tariff preference rather than legal drafting
Trade officials are expected to continue engagement with their US counterparts, including at the G20 Trade Ministerial meeting
India-US Interim Trade Agreement (February 2026) vs a full Bilateral Trade Agreement (BTA)
India and the United States announced a framework for an interim trade agreement in February 2026, which reduced the reciprocal tariff applied to a range of Indian exports (textiles, apparel, leather, footwear, chemicals, and other goods) from 50% to 18%. This interim arrangement is distinct from — and a step toward — a comprehensive BTA that would cover a wider range of issues including services, investment, intellectual property, labour and environmental standards.
Key Details
- The 50% tariff level had itself resulted from an escalation: an initial reciprocal tariff was followed by an additional ad valorem duty imposed via executive order in August 2025, linked to India's continued import of Russian-origin crude oil
- The February 2026 interim deal reduced this to 18% after India committed to phasing out purchases of Russian oil and increasing purchases of US energy products
- A full BTA is meant to go further than the interim tariff fix, addressing non-tariff barriers, technical barriers to trade, customs facilitation, trade remedies, and government procurement
The Commerce Ministry's insistence on "preferential" (not merely reduced) tariff terms signals that India is negotiating for an edge over competitor exporting nations under the full BTA, not just a repeat of the interim rate cut already secured in February 2026.
Most Favoured Nation (MFN) Principle vs Preferential Trade Agreements
Under the World Trade Organization framework, the Most Favoured Nation principle (GATT Article I) requires a country to extend the same tariff treatment to all WTO members that it extends to its most-favoured trading partner. Bilateral or regional Free Trade Agreements/BTAs are a WTO-recognised exception to MFN (under GATT Article XXIV), allowing two countries to offer each other tariff concessions not extended to other WTO members.
Key Details
- India is seeking a tariff rate for its exports to the US that is lower than the rate applied to competitor exporting economies mentioned in trade discussions (such as Vietnam, Thailand, Indonesia, Bangladesh and China)
- Since the WTO's IEEPA-based reciprocal tariff regime was challenged as unconstitutional by the US Supreme Court in February 2026, uniform tariff rates across countries face legal uncertainty, making a bilaterally negotiated preferential rate under a BTA more durable than an executive-order tariff
- India's other completed FTAs (such as the India-UAE CEPA, 2022, and the India-Australia ECTA, 2022) already provide templates for tariff-preference negotiation
The Commerce Ministry's precondition of "preferential" tariffs over "reciprocal" tariffs is a direct reference to converting an executive-order-based tariff arrangement into a treaty-based preferential arrangement under GATT Article XXIV, which offers more legal stability than a unilateral US tariff order.
United States Trade Representative (USTR) and Trade Negotiation Architecture
On the US side, trade negotiations with foreign countries — including tariff and non-tariff issues — are led by the Office of the United States Trade Representative (USTR), a Cabinet-level agency. On the Indian side, the Ministry of Commerce and Industry, through the Department of Commerce, leads FTA/BTA negotiations.
Key Details
- Indian trade officials were expected to hold bilateral talks with the USTR around the G20 Trade Ministerial meeting
- The G20 Trade Ministerial is a recurring forum where G20 member states' trade ministers discuss global trade issues; it operates separately from bilateral negotiation tracks like the India-US BTA
- India's Department for Promotion of Industry and Internal Trade (DPIIT) and Department of Commerce coordinate the domestic industry consultations that feed into BTA positions, including "sensitive list" carve-outs (as done in the India-UAE CEPA)
The workshop setting (a national outreach programme on leveraging FTAs) reflects the institutional process by which India calibrates its BTA negotiating position with domestic exporter interests before committing to preferential terms with the US.
- Interim India-US trade agreement announced: February 2026; cut tariff on a range of Indian exports from 50% to 18%
- Original reciprocal tariff escalation: additional ad valorem duty imposed August 2025, linked to Russian oil imports, taking the rate to 50%
- US Supreme Court ruling on IEEPA-based reciprocal tariffs: 20 February 2026
- BTA drafting status: reported to be largely finalised, pending agreement on preferential tariff terms
- Competitor economies cited in tariff-preference discussions: Vietnam, Thailand, Philippines, Indonesia, Malaysia, China, Bangladesh, Sri Lanka
- Relevant WTO provisions: GATT Article I (MFN principle), GATT Article XXIV (FTA exception to MFN)