US President Trump announced overnight that US and India had agreed on a trade deal, under which reciprocal tariffs on India will be lowered to 18% from 25% earlier. There was no explicit mention of how the additional punitive tariff of 25% (due to Russian oil purchases) will be treated, although US Ambassador to India Sergia Gor said in press comments, that the final tariff rate will stand at 18% (vs 50% earlier). This was contingent on the country continuing to cut back on oil purchases from Russia. US President's social media post also indicated that India had agreed to reduce its tariffs and non-tariff barriers, while making commitments to step up purchases from the US to “over $500bn” of energy, technology, agricultural, and coal supplies etc, without alluding to any timeline.
In return, India’s PM Modi said, on his social media handle, that “Made in India” products will now have a reduced tariff of 18%. This effectively takes India’s tariff close to most of the ASEAN countries and puts it at an advantageous position vs China. India’s goods exports to the US stood at $86.5bn in FY25 and imports at $46bn (~6.7% share in total imports). Imports of petroleum, crude and products from Russia moderated to $33bn in FY26 (YTD), vs annual $53.5bn in FY25. There were earlier reports that private sector refiners had sharply reduced purchases following US sanctions on specific Russian entities last year.
At the onset, this breakthrough is unmistakably positive for the real economy/ exports, sentiments as well as financial markets, while further details are awaited. Textiles, gems & jewellery, engineering goods, leather and chemicals are likely amongst the key gainers. An eventual unveiling of the bilateral trade agreement will provide more details on the beneficiary product lines and trade as well as investment commitments. Domestic markets are expected to witness a relief rally at open, after high tariffs had been one of the key drags on sentiments in the past quarter.
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