How India-US Strengthen Critical Technology and Energy Ties

Interim pact signals deeper India-US economic and security alignment

The signing of the India-US Interim Trade Agreement in February 2026 marks a clear shift in how India and the United States do business. For years, trade ties were shaped by disputes over tariffs, market access, and political pressure. The agreement creates a new pathway for their relationship. The Indo-Pacific strategic partnership framework includes trade as an essential element, which connects economic development to shared geopolitical objectives.

Instead of treating trade as a series of short-term negotiations, both countries are linking commercial access to long-term supply chain security. This change reflects how deeply economics and geopolitics are now connected.

The Architecture of the Deal

The agreement produces its most useful result through its dramatic reduction of trade tariffs between India and the United States. The United States reduced its tariffs on Indian-manufactured products, which had reached 50 percent, to a new average of 18 percent. The change enhances the competitiveness of exporters in the pharmaceutical, textile, gems, and jewelry industries. Indian products can now reach US buyers at prices that better match rivals from Southeast Asia.

In return, India plans to purchase US products worth $500 billion over the next five years. Funding will come from energy sources, including LNG and coking coal, and from high-value aerospace technology. India achieved the successful removal of sensitive agricultural and dairy sectors from trade agreement restrictions. This system protects small farmers from unexpected competition that could emerge from American imports, which could generate political pressure and social unrest in their communities.

Ending the Energy Impasse

Energy had become an obstacle to progress in India-US trade relations. India began buying more Russian oil. The US government imposed a 25% surcharge on specific Indian products that contained energy-related materials. The new agreement removes that surcharge, which reduces export difficulties for Indian businesses.

In parallel, India has committed to gradually diversifying its energy imports toward American and Middle Eastern suppliers. This approach gives India flexibility to manage costs while signaling alignment with US strategic priorities. It also allows both countries to move past immediate tensions linked to the Russia-Ukraine war and focus on longer-term economic and security interests in the Indo-Pacific.

India as the China-Plus-One Anchor

A central strategic outcome of the deal is India’s positioning as a “China-Plus-One” alternative for global manufacturing. The US is encouraging companies to reduce dependence on East Asia and shift parts of their supply chains to trusted partners.

The agreement has resulted in expanded collaborative efforts between the two parties through their partnership in Critical and Emerging Technology. The agreement provides three specific benefits, including expedited semiconductor fabrication equipment approval processes and simplified access to advanced GPU and AI systems for Indian data centers, and complete joint development of space and defense supply chains between the two countries. The measures that India has implemented position the country as a center of advanced manufacturing, serving both commercial and national defense requirements.

The Road needs Agreement

It is interim for a reason. Major issues remain unresolved, including Digital Trade rules around data localization and intellectual property rights in the medical sector. The two governments established a Trade Policy Forum, which will conduct quarterly meetings to ensure ongoing progress in their discussions. The objective seeks to resolve conflicts at an early stage while preserving progress toward establishing a complete trade agreement.

Broader Significance

The India-US Interim Trade Agreement shows how strategic priorities increasingly shape trade policy, as the agreement seeks to position itself as an international manufacturing and technology center. The United States gains a reliable democratic ally through this agreement to secure a strategic partner in a region that will determine future global development.

In a fragmented global economy, this deal reflects a simple reality. Strategic alignment now matters as much as commercial gain, and in some cases, more.