India and US Forge Interim Trade Deal with Tariff Reductions on Key Goods
In a significant development for bilateral trade, India and the United States have established a framework for an interim trade agreement. This pact involves New Delhi committing to reduce or eliminate tariffs on a wide array of US industrial goods and numerous agricultural products, including soybean oil, wine, spirits, dried distillers' grains (DDGs), red sorghum for animal feed, tree nuts, and fresh and processed fruits. The joint statement, released on a recent Saturday, outlines this "Interim Agreement regarding reciprocal and mutually beneficial trade," marking a pivotal step in enhancing economic ties between the two nations.
Soybean Oil Imports See Sharp Increase from the US
India, one of the largest global buyers of soybean oil, imported 47.83 lakh tonnes valued at $5.049 billion during the fiscal year 2024-25, constituting 6.34% of the country's total import bill of $721.2 billion. Historically, Argentina has been the top supplier, accounting for over half of India's imports at 25.56 lakh tonnes, followed by Brazil, Nepal, Switzerland, Russia, and the Netherlands. The US contributed only 2.2% or 1.06 lakh tonnes of the total soybean oil imports in that period.
However, recent months have witnessed a dramatic surge in imports from the US, with figures reaching 1.22 lakh tonnes during the April-November period of 2025-26. Currently, India imposes a standard duty of 45% on soybean oil imports, with a lower preferential rate of 35% for certain areas. This tariff reduction under the new deal is expected to further boost US exports to India.
Global and Domestic Soybean Production Context
In 2024-25, soybean cultivation in India covered 12.95 million hectares, yielding 15.26 million metric tonnes with an average output of 1,179 kg per hectare. Primarily grown as a kharif crop in states like Madhya Pradesh, Maharashtra, and Rajasthan, India's production represents only 3% of the global total. Globally, Brazil leads as the top producer with 40% or 171.5 million tonnes, followed by the US at 28% or 119.05 million tonnes, and Argentina at 12% or 51.11 million tonnes. Argentina, despite being India's largest source of soybean oil imports, ranks third in overall production.
Impact on Animal Feed and Fruit Imports
The trade deal also includes provisions for animal feed items such as dried distillers' grains (DDGs) and red sorghum. DDGs, protein-rich by-products from corn and rice-based ethanol production, are crucial for livestock feed. The US produces 44 million tonnes of DDGS annually, and India currently imposes a 15% duty on imports. In 2024-25, India exported $86 million worth of DDGS, mainly to Vietnam, Bangladesh, and Nepal.
Regarding fresh fruits, India imported $3 billion worth in 2024-25, with $1.12 billion sourced from the US, a major provider of almonds, walnuts, and apples. Current import duties include Rs 42 per kg on almonds in shell and Rs 120 per kg on shelled almonds, while walnuts face duties of 120% on in-shell and 100% on shelled varieties. The tariff cuts are poised to increase US fruit exports to India.
Wine and Spirits Trade Dynamics
In the alcoholic beverages sector, India imported wines worth $26 million in 2024-25, primarily from Australia, Singapore, France, and Italy. Spirits and liquor imports totaled $600 million, with key sources being the UK, Singapore, the UAE, Ireland, and the US. India currently imposes a 150% import duty on various liquors, including bourbon whiskey, scotch, rum, gin, vodka, and tequila. The reduction in tariffs under the new agreement is expected to stimulate imports from the US.
Concerns Over Farmer Impact and Government Assurance
While Commerce Minister Piyush Goyal emphasized that "no concessions have been extended to sensitive agricultural sector produce," experts like Ajay Srivastava, founder of the Global Trade Research Initiative, warn that tariff reductions on US fresh fruits such as apples and oranges, and on soybean oil, could adversely affect Indian farmers and provoke opposition from agricultural groups. Srivastava noted that the joint statement mentions "additional products" with details yet to be disclosed, raising uncertainties.
Goyal reiterated the government's commitment, stating, "The interests of our farmers remain paramount in all trade negotiations. The Modi government remains fully committed to protecting our Annadatas and securing rural livelihoods." He assured that sensitive sectors like grains, fruits, vegetables, spices, oilseeds, dairy, poultry, and meat have been safeguarded while securing preferential access for Indian goods through the India-US Interim Agreement framework.
This interim trade deal represents a strategic move to strengthen economic cooperation between India and the US, with potential benefits for trade volumes but also concerns for domestic agricultural stakeholders. As details unfold, the impact on both economies will be closely monitored.
