US President Donald Trump’s decision to sharply reduce reciprocal tariffs on Indian goods from 50% to 18% has triggered widespread relief across India, even as questions persist over the exact contours and commitments of the understanding announced by the White House. The move marks a significant easing of trade tensions that had strained bilateral ties over the past year and weighed heavily on India’s export-driven sectors, currency and financial markets.
India had been subjected to some of the highest tariffs globally after the Trump administration doubled duties on Indian imports from 25% to 50% in August last year. At the time, Washington justified the hike by alleging that India’s purchase of discounted Russian oil was indirectly supporting Moscow’s war in Ukraine. The steep tariffs had an immediate impact, with Indian exports to the US contracting sharply, particularly in labour-intensive sectors such as textiles, seafood, gems and jewellery, which are major sources of employment.
The latest announcement followed a phone call between Trump and Prime Minister Narendra Modi on Monday. Trump subsequently claimed that Modi had agreed to halt purchases of Russian oil and instead increase energy imports from the United States, and potentially Venezuela. While the Indian government has not confirmed these specific assertions, Modi publicly welcomed the tariff reduction, thanking Trump “on behalf of the 1.4 billion people of India” and expressing hope that the partnership between the two countries would reach “unprecedented heights”.
Industry bodies and market participants in India broadly welcomed the move, viewing it as the removal of a major overhang. Fund manager Nilesh Shah said the tariff cut eased uncertainty that had been hanging over the rupee, equity markets and interest rates, though he cautioned that the ultimate impact would depend on the fine print. Tariff-related uncertainty had been one of the factors behind India’s widening trade deficit, a weakening currency and capital outflows over the past year.
At 18%, the revised tariff now places India broadly in line with other Asian manufacturing hubs such as Vietnam, Thailand and Bangladesh, which face US duties ranging from about 19% to 40%. Economists say this improves India’s attractiveness as an alternative to China in the ongoing reconfiguration of global supply chains. Analysts at Capital Economics noted that India continues to offer advantages including relatively low labour costs, political stability and a large domestic market that multinational companies can use to hedge against future trade disruptions.
Textile exporters, among the hardest hit by the earlier tariffs, also expressed optimism. The Confederation of Indian Textile Industry said the move would allow Indian firms to compete more effectively in the US, which remains the single-largest destination for India’s textile and apparel exports.
However, trade experts have urged caution, warning that much of what has been announced so far remains vague. Ajay Srivastava of the Global Trade and Research Initiative pointed out that Trump’s social media post did not clarify which products are covered, the timelines involved, or whether India has agreed to eliminate tariffs and non-tariff barriers in sensitive areas such as agriculture.
Agricultural access remains particularly contentious. US Secretary of Agriculture Brooke Rollins said the deal would enable greater exports of American farm products to India, helping reduce the US’s agricultural trade deficit. Delhi has avoided commenting on this, given the political sensitivity of agriculture, which supports around half of India’s population.
Srivastava also questioned Trump’s claim that India had committed to large-scale “Buy American” purchases worth more than $500 billion, noting that India’s total annual imports from the US are currently below $50 billion. Until a joint statement or negotiated text is released, he said, the announcement should be treated as a political signal rather than a concluded trade agreement.
Despite the uncertainty, analysts see the breakthrough as directionally positive, both economically and geopolitically. The tariff dispute had coincided with India deepening engagement with China and Russia, including high-profile meetings and declarations of partnership. A thaw with Washington could prompt Delhi to tilt back towards closer alignment with the US, even as it continues to balance multiple strategic relationships.
