India-US Trade Deal: First Phase Finalised, Legal Drafting Under Way; India-EU FTA Signing Set for December
The Union Ministry of Commerce and Industry said the first phase (first tranche) of the India-US Bilateral Trade Agreement has been finalised. It is now going through legal drafting, the stage where agreed points are turned into exact treaty text.
India plans to put the first phase into force only once it secures a competitive advantage over its peer countries, meaning Indian goods should face lower or equal US tariffs compared with rival exporting countries.
The US Ambassador to India said the "big framework" and "big items" of the deal are done, and talks have reached the level of individual products and tariff percentages. The two sides have been negotiating for about a year and a half.
India is asking for preferential market access (lower tariffs than other countries get) and more tariff stability in the US market.
The talks are taking place after the US Supreme Court ruled (February 2026) that the US President could not use the International Emergency Economic Powers Act (IEEPA) to impose tariffs, which forced the US to rework its trade arrangements.
The ministry also said the India-European Union Free Trade Agreement will be signed in December 2026 and is expected to come into force in February or March 2027.
India-US Bilateral Trade Agreement (BTA)
The India-US Bilateral Trade Agreement (BTA) is a trade deal that India and the United States are negotiating. Its aim is to make it cheaper and easier for each country to sell goods and services to the other, mainly by cutting import taxes (tariffs) and removing other trade barriers. The deal is being built in stages, or "tranches", rather than all at once. An interim framework was announced in February 2026, and the first full tranche is now being turned into legal text.
The first tranche of the BTA has now moved from negotiation to legal drafting. India wants to switch it on only when its exporters clearly get better US market access than competing countries, which is why timing has become a key issue.
Free Trade Agreements: Concept and WTO Framework
A Free Trade Agreement (FTA) is a deal between two or more countries to remove or sharply cut tariffs on most of the goods they trade with each other, while each country keeps its own tariffs for outsiders. Modern FTAs also cover services, investment, digital trade and rules on standards. Under World Trade Organization (WTO) rules, such deals are allowed as an exception to the "same tariff for all members" principle, as long as they cover substantially all trade. The India-EU Free Trade Agreement is the newest and one of the largest examples of an FTA for India.
The ministry confirmed that the India-EU FTA, concluded in January 2026, will be signed in December. Together with the US deal, it shows India negotiating with its two largest trading partners at the same time.
International Emergency Economic Powers Act (IEEPA), 1977
The International Emergency Economic Powers Act (IEEPA) is a United States law of 1977. It lets the US President control economic dealings with foreign countries, people or companies after declaring a national emergency over an "unusual and extraordinary threat" coming mainly from outside the US. It was mostly used for sanctions, such as freezing assets. In 2025 it was used, for the first time on a large scale, to impose tariffs, including the "reciprocal tariffs" that hit Indian goods.
The Supreme Court ruling against IEEPA tariffs changed the base on which the India-US deal was being negotiated. This is one reason India is now pressing for tariff stability and a clear edge over rival exporters before the first tranche takes effect.
- India-US BTA: first tranche finalised; in legal drafting (October 2026); talks running for about 18 months
- Interim framework (February 2026): US tariff on most Indian goods cut from 50% to 18%
- India's purchase intention under the framework: about $500 billion of US goods over 5 years
- US Supreme Court ruling on IEEPA tariffs: 20 February 2026, 6-3, Learning Resources, Inc. v. Trump
- Section 122, Trade Act of 1974: temporary tariff up to 150 days
- India-EU FTA: talks launched 2007, stalled 2013, relaunched 2022, concluded 27 January 2026 (16th India-EU Summit)
- India-EU FTA signing: planned December 2026; entry into force expected February or March 2027