India, US agree on interim trade deal; Auto exports to get preferential quota

India and the United States have reached a framework for an interim trade agreement, under which the US will grant a preferential tariff-rate quote for automotive parts imported from India. Under the framework, the US will also reduce its tariffs on Indian imports on a wide range of products to 18% from the existing 50%.

“Consistent with US national security requirements, India will receive a preferential tariff rate quota for automotive parts subject to the tariff imposed to eliminate threats to national security found in Proclamation 9888 of May 17, 2019 (Adjusting Imports of Automobiles and Automobile Parts Into the United States), as amended,” both countries said in a joint statement.

Auto component exports from India to the US now carry a tariff of around 25%. About 55% of India’s auto component exports to the US, mainly car parts, were covered under Section 232 tariffs. While commercial vehicle and off-highway parts were hit by additional reciprocal tariffs that pushed duties as high as 50% in some cases, a clarification issued on November 1 rolled these higher rates back, bringing all these categories under a single 25%, which is now applied uniformly to Indian auto component exports to the US.

India’s auto component industry recorded a trade deficit of US$200 million during the first half of FY26, primarily due to the absence of growth in exports to the US amid tariffs, while all other major regions saw growth in exports. Imports from China also grew significantly during the period. The industry clocked US$41.2 billion in revenue during April–September 2025, a growth of 3.5% year-on-year. Exports rose 9.3% to US$12.1 billion, while imports into India rose at a faster rate of 12.5% to US$12.3 billion.

Data from ACMA shows that India’s component exports to the US were at US$3.12 billion in April–September 2025, compared to US$3.10 billion in the year-ago period. 

Under the terms of the interim framework, India would reduce or eliminate tariffs on a range of US industrial goods and agricultural products, including dried distillers’ grains, animal feed sorghum, tree nuts, fresh and processed fruit, soybean oil, wine and spirits.

The joint statement from both countries said the US has agreed to apply a reciprocal tariff rate of 18% on Indian goods such as textiles, leather and footwear, plastics, rubber products, organic chemicals, home décor, artisanal items and certain machinery. If the interim agreement is finalised, the tariff could be removed on other items identified in a potential tariff adjustments annex.