New Delhi / Washington: The United States has agreed to cut tariffs on Indian exports to 18% from an effective 50%, in what both governments describe as a major reset of trade ties.
The move — announced by U.S. President Donald Trump after a call with Prime Minister Narendra Modi — places India in a comparatively favorable trade position against several regional rivals and has sparked a strong market reaction.
Under the new arrangement, the United States will also remove an additional punitive levy tied to India’s purchases of Russian crude oil, according to White House sources.
Washington has framed the tariff cut as a signal of enhanced cooperation and greater access to the U.S. market for Indian goods.
Prime Minister Modi welcomed the development, saying the tariff relief would boost exports of textiles, engineering goods and manufactured products, among others, by making them more competitive in the U.S. — India’s largest export destination.
Tariff Comparisons — India vs World
With the revised 18% tariff rate, India now enjoys one of the lower U.S. duty burdens among emerging market exporters, presenting a competitive edge over a number of peer economies:
Lower than many Asian competitors: Bangladesh, Sri Lanka, Vietnam and Taiwan face U.S. tariffs of around 19–20%, while Pakistan and Malaysia are at roughly 19%.
Better off than China and other major exporters: U.S. duties on Chinese goods remain steep (above 30%), while tariffs on imports from nations such as South Africa and Brazil are much higher.
Still above some advanced economies: The European Union, Japan, South Korea and the United Kingdom enjoy tariff rates between 10–15% under prior bilateral arrangements.
Trade experts say this recalibrated position could help Indian exporters regain market share lost during the tariff escalation phase, while also bolstering India’s relative attractiveness compared with other Asian manufacturing hubs.
Financial markets responded strongly to the announcement. The Nifty 50 index jumped nearly 3%, while the rupee strengthened above ₹90 per dollar, reflecting renewed investor confidence and relief after months of tariff-related uncertainty. Export-linked sectors, including textiles, chemicals, and engineering, saw broad gains.
Economists highlighted that the tariff cut helps remove a “hanging sword” over India’s external sector outlook, which had been weighed down by punitive levies and a depreciating currency through much of 2025.
The deal comes after months of tension over trade barriers and tariff retaliation, and is widely viewed as a strategic reset in U.S.-India economic relations. While the tariff cut itself is concrete, other elements of the broader agreement — including any commitments on energy procurement or market access for U.S. exports into India — remain under technical review by officials in both capitals.
U.S. officials have described the agreement as a reflection of deepening bilateral ties, with potential long-term benefits for both economies — especially as global supply chains undergo realignment due to geopolitical shifts.