US President Donald Trump has lowered reciprocal tariffs on Indian imports from 50% to 18%, providing relief to Asia’s third-largest economy. Trump raised the tariffs last August, citing India’s purchase of discounted Russian oil as supporting Moscow’s war in Ukraine.
Following a call with Indian Prime Minister Narendra Modi, Trump claimed Modi agreed to stop buying Russian oil and purchase more from the US and potentially Venezuela. Modi thanked Trump “on behalf of the 1.4 billion people of India,” expressing hope to take US-India ties to “unprecedented heights.”
Trade war impact on Indian exports
Trump’s previous tariffs had sharply reduced Indian exports to the US across textiles, seafood, jewellery, and other key sectors. The measures forced the protectionist Indian government to accelerate other trade agreements and diversify export markets.
Last week, India and the EU struck a major trade deal, removing tariffs on 80–90% of goods. India has concluded nine free trade agreements in four years to offset delays in US negotiations.
Industry leaders welcomed Trump’s tariff reduction. Nilesh Shah, a fund manager, said: “While the devil is in the details, it removes a hanging sword over the rupee, equity, and rates market. Let us hope it is a win-win deal for both countries.”
Boost for manufacturing and textiles
The 18% tariff now aligns India with peers such as Vietnam, Thailand, and Bangladesh, which pay 19–40% on US exports. Analysts say this enhances India’s appeal as an alternative to China for global supply chains. Shilan Shah of Capital Economics highlighted India’s advantages: low labour costs, political stability, and a large domestic market for multinational companies.
India’s textile industry welcomed the move, with the Confederation of Indian Textile Industry saying it will help exporters “compete effectively in the US market, the single-largest market for India’s textile and apparel exports.”
Questions remain over details
Experts caution that uncertainty remains. Ajay Srivastava of the Global Trade and Research Initiative (GTRI) noted that Trump’s claims leave questions about product coverage, timelines, and whether India agreed to zero tariffs and non-tariff barriers, especially in sensitive areas like agriculture.
US Secretary of Agriculture Brooke Rollins said the deal will allow more US farm exports to India, boosting prices and reducing the US $1.3bn agricultural trade deficit with India. Delhi has not commented on these claims.
GTRI also warned that Trump’s statement on Modi buying $500bn in US goods exceeds India’s current annual imports from the US of under $50bn. Srivastava said: “Until there is a joint statement, negotiated text, and clarity on enforceability, this should be treated as a political signal – not a concluded trade deal.”
Geopolitical significance of the thaw
Analysts see the breakthrough as directionally positive. The US-India Strategic Partnership Forum described the move as an important first step, with additional negotiations expected.
The thaw also holds geopolitical weight. Over the past year, India strengthened ties with China and Russia, with leaders displaying solidarity at the Shanghai Cooperation Organisation Summit in September 2025. Delhi may now lean more closely towards the US, though many in India prefer to remain strategically unaligned. Shilan Shah added: “If this rapprochement proves durable, India would likely gravitate back to the US bloc.”
Source: BBC
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