The US tariff cut is positive for Indian trade and markets but not an unequivocal windfall. It reduces one layer of friction and offers relative advantage in goods exports, yet it comes with concessions and geopolitical costs. The ultimate balance of gains will depend on implementation details, how India diversifies export markets, and whether reforms at home match the opening offered by the US deal.
Opening the US agriculture goods imports by India is hailed by the US Agriculture Secretary Brook Rollins, who says. “Thank you for once again delivering for our American farmers. New US-India deal will export more American farm products to India’s massive market, lifting prices and pumping cash into rural America. America’s agricultural deficit is $ 1.3 billion. India’s growing population is an important market for American agricultural products.
How would Indian farmers gain or suffer remains the big question.
In short: India gains more on sentiment and sectoral export competitiveness, while the US secures broader market access and strategic leverage.
The deal is beneficial, but not a clear, unilateral victory. In 2024, the US levied a trade-weighted average tariff of approximately 2.4% on Indian goods. While overall duties were relatively low, specific products faced varying rates, with discussions often focusing on high Indian tariffs on US goods and ongoing trade negotiations rather than high blanket US taxes at that time.
The punitive taxes 25 (+25) percent in the post Donald Trump regime has reduced in effect 7 percent taxes to bring it to 18 percent. Indian goods would be levied additional 15.6 percent vis a vis the 2024 rates. Effectively Indian exports would be highly expensive. The exporters would have to sweat hard to keep products competitive.
The United States and India have reached a new trade understanding under which the US will reduce tariffs on Indian goods to 18 percent, down from an effectively punitive 50 percent that included both base and additional tariffs imposed last year. India has agreed to phase out purchases of Russian oil and reduce barriers for US goods as part of the broader agreement.
This move followed months of trade tensions and tariff threats that had chilled exports and markets; the reset has already lifted Indian equities and strengthened the rupee.
The tariff cut improves pricing competitiveness for Indian exporters in the US market, especially in labour-intensive industries like textiles, gems and jewellery, and engineering goods, which were hit hard by the 50 percent levies. Would new duties help Indian products compete better against regional rivals such as Vietnam, Bangladesh and Indonesia, where US tariffs are effectively lower?
The deal reportedly involves India reducing its own barriers on US imports and committing to purchase large volumes, $ 500 billion, of American energy, technology, agricultural and other products. This quid pro quo could widen India’s trade deficit with the US over time and narrow India’s policy space on tariff policy.
India’s total imports are at $ 700 billion. India has FTAs with many countries including the UK and EU. The EU deal is described as a gold mine. It would be a magical trick if it could really import such large volumes from the US, including the heavy poor crude from Venezuela, at a high shipment cost.
Still, with the new tariff rate, India is believed to now enjoy a relative advantage over some Asian competitors in the US market because its goods face lower duties than those from certain peers. Could that improve Indian exporters’ relative market access?
While the tariff is reset to 18 percent, some specific product tariffs (like steel, aluminium and certain auto components) may remain high or unchanged due to ongoing US trade rules (Section 232 duties), limiting relief for those sectors.
Also, tariff cuts mainly help goods exports, which make up a modest share of India’s overall GDP and exports to the US (services, such as IT, are often outside tariff regimes). This means the macro-economic windfall may be more limited than headlines suggest.
Concessions from India
The deal reportedly involves India reducing its own barriers on US imports and committing to purchase large volumes of American energy, technology, agricultural and other products. This quid pro quo could widen India’s trade deficit with the US over time and narrow India’s policy space on tariff policy.
Geopolitical and Strategic Risks
India’s commitment to halt Russian oil purchases represents a significant geopolitical shift that may have cost implications. Russian oil had been a source of relatively cheaper energy; switching sources could raise import bills and impact the current account if not managed carefully.
Dependence on Implementation Details
Many specifics of how tariff cuts will be phased, what products they apply to, and how India will liberalise its own markets have yet to be fully detailed. Without clear, enforceable implementation plans, rhetoric may outstrip reality.
Limited Short-Term GDP Impact
While analysts have suggested modest GDP lifts (e.g., up to 0.3 percent from restored export flows), such gains are modest relative to India’s overall economic size and may not offset domestic weaknesses such as investment hesitation or hinterland distress.
It has some other aspects as well. It is said that there are some other considerations. On January 23, when the US SEC sought court approval to issue summons directly to Gautam Adani and Sagar Adani, the shares of the Adani group companies plunged between 3.54% and 14.54%.
When the share market opened on February 3, after Trump’s trade deal and the shares of the group companies have jumped up in both BSE and NSE indices. All companies have registered huge gains, with Adani Energy Solutions leaping up by an average of 10+ points, Adani Enterprises by 10.72, Adani Green Energy by 10.82, Adani Ports & SEZ by 9.06, Adani Power by 7.58, Adani total Gas by 4.89, Ambuja Cement by 3.3& and Sanghi Industries by 5.28 per cent. all prices quoted are in BSE index.
So who gains more—India or the United States?
For India, the benefits are real but limited: short- to medium-term export relief, improved price competitiveness, firmer investor sentiment, and some easing of currency pressures, along with closer long-term alignment with a major market. Yet these gains are incremental and sector-specific rather than transformational.
For the US, the advantages are broader. Lower tariffs benefit American consumers and firms that source Indian goods, while India’s commitment to buy more US energy, technology and agricultural products directly supports American producers. The deal also advances Washington’s domestic political objective of reducing trade frictions and strengthening strategic ties with a key partner.
In practice, the US may emerge the larger strategic gainer. It secures more reliable access to Indian goods and capital, opens India’s market wider for American exports, and reinforces its geopolitical push to reshape global energy and trade flows. India, meanwhile, regains competitiveness and market confidence but at the cost of some policy flexibility on tariffs and energy sourcing, and with the likelihood of higher imports from the US.
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