India-US Trade: From Tariff Threats to Tech Partnership: UPSC Current Affairs Story Arc

Overview

This arc tracks a volatile but ultimately rewarding period in India-US trade relations. It began in mid-2025 with 'tariff wars' over steel and aluminum, prompting a 9% surge in Indian exports as businesses rushed to beat impending duties. Through intense negotiations on Intellectual Property Rights (IPR) and digital trade, the two nations pivoted from confrontation to cooperation. The climax was a comprehensive trade deal in late 2025 that significantly lowered trade barriers, boosted investor confidence on Dalal Street, and culminated in a high-tech partnership focusing on critical hardware like GPUs and data center infrastructure by early 2026.

How This Story Evolved

US threatens tariffs/India seeks deal (Item 6) → Exporters rush to beat tariffs (Item 2) → Negotiations on IPR/Digital trade continue (Item 1) → Trade deal finalized/Tariffs cut (Item 15) → Trade expands into high-tech sectors (Seed)

1. 2025-05-14: Discussion on India-US Trade Relations
   More details

   UPSC Angle: Tensions exist in India-U.S. trade relations.

   Key Facts:

   • India
   • U.S.
   • steel
   • aluminum
   • tariffs
   • trade deal
2. 2025-05-16: Amid Rush to Deliver US Orders to Beat Tariff, Goods Exports Jump 9%
   More details

   UPSC Angle: Not exam-relevant

   Key Facts:

   • goods exports
   • US orders
   • tariff
   • 9%
3. 2025-06-07: India-US Trade Relations Evolving
   More details

   UPSC Angle: India-US trade relations evolving, focusing on digital trade.

   Key Facts:

   • Discussions on digital trade, IPR, and tariff reduction.
4. 2025-10-28: India-US Trade Deal Boosts FII Buying
   More details

   UPSC Angle: Not exam-relevant

   Key Facts:

   • India-US trade deal
   • FIIs
   • ₹5,426 crore (shares bought)
   • DIIs
   • ₹345 crore (shares bought)
   • Tariffs cut from 50% to 18%
   • Donald Trump
5. 2026-02-09: India and US Increase Trade in Technology Products
   More details

   UPSC Angle: India and US increase trade in technology products.

6. 2026-02-12: US Trade Deal Raises Questions About Transparency
   More details

   UPSC Angle: US trade deal raises questions about transparency.

   Key Facts:

   • India and the US have reached a framework for an interim trade agreement
   • Concerns over conditionalities linked to Russian oil imports
7. 2026-02-14: India Tested by U.S. Sanctions in One-Sided Trade Deal
   More details

   UPSC Angle: India-U.S. Bilateral Trade Agreement concerns about negotiation process and potential impacts.

   Key Facts:

   • India–United States Bilateral Trade Agreement
   • U.S. tariffs at 18% on Indian goods
   • India committed to buy USD 500 billion worth of American goods
   • India's Russian oil share fell from 40% (2024) to 25% (Dec 2025)
   • high U.S. tariffs
   • Russian oil
   • strategic autonomy
8. 2026-02-21: India Joins US Initiative for Secure Technology Supply Chains
   More details

   UPSC Angle: India joins US initiative for secure technology supply chains.

   Key Facts:

   • India joined a U.S.-led initiative to strengthen technology cooperation.
   • The initiative focuses on secure supply chains for semiconductors, advanced manufacturing, and critical technologies.
   • President Donald Trump announced the U.S. would lower reciprocal import tariffs on India from 25% to 18% and remove the additional 25% levy for buying Russian crude after Indian Prime Minister Narendra Modi agreed to stop it.

Genesis

Trigger

On May 14, 2025, the U.S. increased duties on Indian steel and aluminum products, prompting India to consider retaliatory tariffs and initiate urgent trade deal discussions.

Why Now

The shift occurred as both nations sought to stabilize supply chains and reduce reliance on other major manufacturing hubs, alongside a push to formalize digital trade rules which were previously a point of contention.

Historical Context

This connects to the long-standing friction over Section 232 of the US Trade Expansion Act (steel/aluminum tariffs) and India's historical resistance to a full Free Trade Agreement (FTA) due to agriculture and dairy sensitivities.

Key Turning Points

1. [2025-10-28] Finalization of the India-US Trade Deal

   It shifted the relationship from 'threat-based' to 'partnership-based' by institutionalizing tariff cuts.

   Before: Tariffs on Indian exports were as high as 50%. After: Tariffs were slashed to 18%.

Key Actors and Institutions

Key Institutions

• Department for Promotion of Industry and Internal Trade (DPIIT)
• Foreign Institutional Investors (FIIs)
• World Trade Organization (WTO)
• Dalal Street (NSE/BSE)

Key Concepts

Tariff Arbitrage

The practice of rushing exports to take advantage of lower duty windows before new tariffs are implemented.

Current Fact: India's goods exports jumped 9% on May 16, 2025, as exporters rushed to beat the US tariff implementation.

FII Inflows

Investment by foreign entities in Indian financial markets, often sensitive to geopolitical and trade policy stability.

Current Fact: FIIs bought shares worth ₹5,426 crore on February 3, 2026, following the trade deal finalization.

Digital Trade & IPR

Cross-border trade of services and data protected by legal frameworks to encourage innovation.

Current Fact: Negotiations in June 2025 specifically targeted differing rules on digital trade and IPR protections.

What Happens Next

Current Status

As of February 9, 2026, the relationship has graduated into a 'Tech Partnership,' with both nations facilitating trade in Graphics Processing Units (GPUs) and data center equipment.

Likely Next

Expect further announcements regarding the 'iCET' (Initiative on Critical and Emerging Technology) and potential easing of export controls on dual-use technology.

Wildcards

A sudden change in US administration or a WTO dispute filing by a third party could re-introduce protectionist pressures or disrupt the current tariff regime.

Why UPSC Cares

Syllabus Topics

• Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests
• Effects of liberalization on the economy, changes in industrial policy and their effects on industrial growth

Essay Angles

• Economic Diplomacy: The new frontier of International Relations
• From Protectionism to Partnership: The Evolution of Global Trade in the 21st Century

Prelims Likely: Yes

Mains Likely: Yes

Trend Signal: rising

Exam Intelligence

Previous Year Question Connections

• Identified the US as India's largest trading partner. — The 2025 deal reinforces the US as the primary destination for Indian manufactured and tech goods.
• Tested how export growth depends on tariff reduction vis-à-vis MFN tariffs. — The arc proves this concept; the reduction from 50% to 18% is a textbook case of tariff-driven export potential.

Prelims Angles

• Tariff reduction from 50% to 18% as a specific outcome of the 2025 deal.
• The specific jump in exports (9%) following the May 2025 tariff threat.
• The dual-nature of FII vs DII buying patterns following the October 2025 deal (₹5,426 cr vs ₹345 cr).

Mains Preparation

Sample Question: Analyze the impact of the 2025 India-US Trade Deal on India's push towards becoming a high-tech manufacturing hub. How does this agreement balance India's interests in agriculture with its aspirations in digital trade?

Answer Structure: Intro: Context of the 2025 deal. Body 1: Economic impact (tariff cuts, export surge). Body 2: Strategic dimension (GPUs, tech trade). Critical Analysis: Navigating IPR and agri-subsidies. Way Forward: Deeper tech integration under iCET.

Essay Topic: The Inevitable Intersection of Trade, Technology, and Geopolitics.

Textbook Connections

Key Takeaway

The India-US trade relationship has evolved from transactional tariff disputes to a strategic high-tech partnership, underpinned by significant liberalization in duty structures.

All Events in This Story (8 items)

1. 2025-05-14 [International Relations] — Discussion on India-US Trade Relations
   Tensions exist in India-U.S. trade, with the U.S. increasing duties on some Indian products like steel and aluminum. India is considering imposing tariffs against the U.S. in response. India is in discussion with the U.S. to sign a trade deal to avoid tariffs on imports from the U.S.
   More details

   UPSC Angle: Tensions exist in India-U.S. trade relations.

   Key Facts:

   • India
   • U.S.
   • steel
   • aluminum
   • tariffs
   • trade deal
2. 2025-05-16 [Economy] — Amid Rush to Deliver US Orders to Beat Tariff, Goods Exports Jump 9%
   Due to efforts to deliver US orders ahead of tariff implementations, India's goods exports have increased by 9%. This surge reflects efforts to capitalize on trade opportunities before potential tariff barriers take effect.
   More details

   UPSC Angle: Not exam-relevant

   Key Facts:

   • goods exports
   • US orders
   • tariff
   • 9%
3. 2025-06-07 [International Relations] — India-US Trade Relations Evolving
   India and the U.S. are engaged in discussions to enhance trade cooperation, focusing on digital trade, IPR, and tariff reductions. Challenges include protectionist tendencies, differing digital trade rules, and concerns over India's agriculture subsidies. The two countries aim to strengthen their strategic partnership through trade diplomacy.
   More details

   UPSC Angle: India-US trade relations evolving, focusing on digital trade.

   Key Facts:

   • Discussions on digital trade, IPR, and tariff reduction.
4. 2025-10-28 [Economy] — India-US Trade Deal Boosts FII Buying
   Foreign institutional investors (FIIs) made a strong comeback to Dalal Street, with their biggest single-day buying since October 28, 2025, after the finalization of the India–US trade deal boosted investor confidence. FIIs bought shares worth ₹5,426 crore, while DIIs purchased shares worth ₹345 crore on February 3. The India-US trade deal cuts tariffs on Indian exports from 50% to 18%.
   More details

   UPSC Angle: Not exam-relevant

   Key Facts:

   • India-US trade deal
   • FIIs
   • ₹5,426 crore (shares bought)
   • DIIs
   • ₹345 crore (shares bought)
   • Tariffs cut from 50% to 18%
   • Donald Trump
5. 2026-02-09 [International Relations] — India and US Increase Trade in Technology Products
   India and the US have recently announced that they will increase trade in technology products, including Graphics Processing Units (GPUs) and other goods used in data centers.
   More details

   UPSC Angle: India and US increase trade in technology products.

6. 2026-02-12 [International Relations] — US Trade Deal Raises Questions About Transparency
   India's recent interim trade framework with the United States has sparked debate regarding transparency and national interest, particularly concerning conditionalities linked to Russian oil imports and the lack of detailed parliamentary discussion. Comparisons are being drawn with Manmohan Singh's handling of the 2005 Civil Nuclear Deal.
   More details

   UPSC Angle: US trade deal raises questions about transparency.

   Key Facts:

   • India and the US have reached a framework for an interim trade agreement
   • Concerns over conditionalities linked to Russian oil imports
7. 2026-02-14 [International Relations] — India Tested by U.S. Sanctions in One-Sided Trade Deal
   The proposed India–United States Bilateral Trade Agreement has sparked debate regarding India's economic policy and foreign relations, with concerns about the negotiation process and potential impacts on energy security and diplomatic relationships. The manner of the negotiation and the linkage of trade with foreign policy raise concerns about India's strategic autonomy.
   More details

   UPSC Angle: India-U.S. Bilateral Trade Agreement concerns about negotiation process and potential impacts.

   Key Facts:

   • India–United States Bilateral Trade Agreement
   • U.S. tariffs at 18% on Indian goods
   • India committed to buy USD 500 billion worth of American goods
   • India's Russian oil share fell from 40% (2024) to 25% (Dec 2025)
   • high U.S. tariffs
   • Russian oil
   • strategic autonomy
8. 2026-02-21 [International Relations] — India Joins US Initiative for Secure Technology Supply Chains
   India has joined a U.S.-led initiative to strengthen technology cooperation among strategic allies, focusing on secure supply chains for semiconductors, advanced manufacturing, and critical technologies amidst geopolitical competition with China. This move aligns India closely with Washington's efforts and follows an interim trade framework to reduce tariffs and grant greater access to each other's markets.
   More details

   UPSC Angle: India joins US initiative for secure technology supply chains.

   Key Facts:

   • India joined a U.S.-led initiative to strengthen technology cooperation.
   • The initiative focuses on secure supply chains for semiconductors, advanced manufacturing, and critical technologies.
   • President Donald Trump announced the U.S. would lower reciprocal import tariffs on India from 25% to 18% and remove the additional 25% levy for buying Russian crude after Indian Prime Minister Narendra Modi agreed to stop it.