🧠Knowledge Drop-114 | India–US Signed Trade Agreement | IAS Prelims 2026-27 Highly Expected MCQs | Current Affairs & GS Essays on iasmonk.com
🧠Knowledge Drop–114 | India–US Signed Trade Agreement
Post Date: 5-2-2026
Syllabus: GS2/International Relations
đź“Ś In News
India and the United States have announced a new trade deal, lowering tariffs and setting ambitious targets for bilateral trade.
Earlier, in August 2025, the US had levied tariffs up to 50% (25% reciprocal + 25% additional duty) linked to India’s Russian oil imports.
🤝 About the India–US Trade Deal
- Tariff Reduction:
- US reciprocal tariffs on Indian goods reduced from 25% to 18%, effective immediately.
- The additional 25% duty imposed earlier has been withdrawn.
- US Claims on Broader Commitments:
- The US asserts that the deal includes zero tariffs and non-tariff barriers for US goods.
- It also claims that India has committed to buy over $500 billion worth of US products across energy, technology, agriculture, coal, and other sectors.
- India’s Commitments:
- India will progressively reduce tariffs and non-tariff barriers against US goods.
🌍 Importance of the Deal
- Strengthens India–US ties amid shifting global geopolitics, especially in the context of China.
- Helps counter China’s dominance in global trade and manufacturing.
- Lower tariffs can improve competitiveness for Indian exporters including farmers, MSMEs, and entrepreneurs, and attract investment.
- Supports the vision of Make, Design and Innovate in India for the world.
- Diversification of oil imports may reduce dependence on Russia, though at potentially higher costs.
- Can help stabilise the rupee amid global economic uncertainty.
- Positions India as a key partner in US-led trade and security frameworks.
⚠️ Challenges
India faces multiple constraints in trade and energy:
- Domestic opposition limits opening agricultural markets to US imports.
- Phasing out discounted Russian crude would raise energy costs and strain refiners.
- Higher US H-1B visa fees hurt Indian IT professionals, while services issues remain largely outside trade deals.
- US threats of tariffs on Iran trade have forced India to scale back trade and pause investment in the Chabahar port project.
📊 About India–US Trade
- The US is among India’s largest trading partners.
- India runs a trade surplus with the US, mainly due to services and high-value exports.
- Bilateral trade rose from US$ 119.71 billion in FY24 to a record US$ 132.2 billion in FY25, reflecting strengthening economic ties.
- The US is the 3rd largest investor in India.
- Cumulative FDI inflows (2000–2025): US$ 70.65 billion.
- Key Indian exports to the US:
- Pharmaceuticals
- Engineering goods
- Electronics
- Gems and jewellery
🧠IAS Monk Whisper
Trade deals are not just about tariffs. They quietly redraw the map of alliances, dependencies, and future power.
Target IAS-2026+: Highly Expected Prelims MCQs :
đź“Ś Prelims Practice MCQs
Topic: Knowledge Drop–114 | India–US Signed Trade Agreement
MCQ 1 | TYPE 1 — How Many Statements Are Correct?
Consider the following statements regarding the recent India–US trade deal:
1)US reciprocal tariffs on Indian goods were reduced from 25% to 18%.
2)The additional 25% duty imposed earlier was withdrawn.
3)The tariff reductions were announced with a deferred implementation date of one year.
4)The earlier higher tariffs were linked to India’s Russian oil imports.
How many of the above statements are correct?
A)Only one
B)Only two
C)Only three
D)All four
🌀 Didn’t get it? Click here (▸) for the Correct Answer & Explanation.
đźź© Correct Answer: C)Only three
🧠Explanation:
Correct Answer: C)
1)✅ True – Tariffs were reduced from 25% to 18% with immediate effect.
2)✅ True – The additional 25% duty was withdrawn.
3)❌ False – The reduction is effective immediately, not deferred.
4)✅ True – The earlier tariffs were linked to India’s Russian oil imports.
MCQ 2 | TYPE 2 — Two-Statement Type
Consider the following statements:
Statement 1: The US claims the deal includes zero tariffs and non-tariff barriers for US goods.
Statement 2: India has agreed to progressively reduce tariffs and non-tariff barriers against US goods.
Which of the above statements is/are correct?
A)Only 1 is correct
B)Only 2 is correct
C)Both 1 and 2 are correct
D)Neither 1 nor 2 is correct
🌀 Didn’t get it? Click here (▸) for the Correct Answer & Explanation.
đźź© Correct Answer: C)Both 1 and 2 are correct
🧠Explanation:
Correct Answer: C)
Statement 1:✅ True – This is the US claim regarding the scope of the deal.
Statement 2:✅ True – India will progressively reduce tariffs and non-tariff barriers.
MCQ 3 | TYPE 3 — Code-Based Statement Selection
Consider the following statements regarding the significance of the India–US trade deal:
1)It is expected to strengthen India–US ties amid global geopolitical shifts.
2)It aims to counter China’s dominance in global trade and manufacturing.
3)Lower tariffs may improve competitiveness for Indian exporters and attract investment.
4)It mandates an immediate and complete halt to India’s imports of Russian crude oil.
Which of the statements given above are correct?
A)1, 2 and 3 only
B)1 and 4 only
C)2 and 4 only
D)1, 2, 3 and 4
🌀 Didn’t get it? Click here (▸) for the Correct Answer & Explanation.
đźź© Correct Answer: A)1, 2 and 3 only
🧠Explanation:
Correct Answer: A)
1)✅ True – Strengthening strategic ties is a key objective.
2)✅ True – The deal is seen in the context of countering China’s dominance.
3)✅ True – Lower tariffs can boost exporters and investment.
4)❌ False – There is no mandate for an immediate halt to Russian crude imports.
MCQ 4 | TYPE 4 — Direct Factual Question
Which one of the following is India’s approximate bilateral trade value with the US in FY25 as per the given data?
A)US$ 100 billion
B)US$ 119.71 billion
C)US$ 132.2 billion
D)US$ 150 billion
🌀 Didn’t get it? Click here (▸) for the Correct Answer & Explanation.
đźź© Correct Answer: C)US$ 132.2 billion
🧠Explanation:
Correct Answer: C)
A)❌ Incorrect – Lower than the reported figure.
B)❌ Incorrect – This is the FY24 figure.
C)✅ Correct – FY25 trade reached a record US$ 132.2 billion.
D)❌ Incorrect – Higher than the reported figure.
MCQ 5 | TYPE 5 — UPSC 2025 Linkage Reasoning Format (I, II, III)
Consider the following statements:
Statement I: The India–US trade deal is strategically significant beyond mere tariff reductions.
Statement II: It is expected to strengthen India’s position in US-led trade and security frameworks and help counter China’s influence.
Statement III: Lower tariffs and investment flows can support Indian exporters and the “Make, Design and Innovate in India for the world” vision.
Which one of the following is correct?
A)Both Statements II and III are correct and both explain Statement I
B)Both Statements II and III are correct but only one explains Statement I
C)Only one of the Statements II and III is correct and that explains Statement I
D)Neither Statement II nor Statement III is correct
🌀 Didn’t get it? Click here (▸) for the Correct Answer & Explanation.
đźź© Correct Answer: A)
🧠Explanation:
Correct Answer: A)
1)✅ Statement I is correct – The deal has strategic and economic implications.
2)âś… Statement II is correct and explains the geopolitical significance.
3)âś… Statement III is correct and explains the economic and industrial relevance.