U.S. President Donald Trump’s decision to slash tariffs on Indian imports sparked a relief rally in India’s markets on Tuesday, boosting sentiment among exporters and policymakers, even as the details of the trade deal remained sparse.
Trump announced on Monday that tariffs on Indian goods would drop from 50% to 18% in exchange for India halting Russian oil purchases and reducing trade barriers. However, neither the White House nor the Indian government immediately provided full details.
An Indian official said the agreement includes commitments to purchase U.S. petroleum, defense equipment, and aircraft, while partially opening India’s highly protected agriculture sector. India has also lowered tariffs on imported cars to meet Washington’s immediate demands.
Trump stated that India would increase its purchases of U.S. goods to over $500 billion, covering energy, coal, technology, agricultural products, and more, though no timeline was specified.
“India’s tariff agreement with the U.S. removes its earlier disadvantage compared to peers,” said Neelkanth Mishra, chief economist at Axis Bank. He added that the deal benefits sectors like gems and jewelry, leather, plastics, ceramics, auto components, and non-tech foreign investment.
By comparison, U.S. tariffs on goods from Indonesia are at 19%, and for Vietnam and Bangladesh, 20%. Indian government data show exports to the U.S. rose 15.88% year-on-year to $85.5 billion from January to November, while imports totaled $46.08 billion.
The announcement eased global uncertainty, said India’s economic affairs secretary Anuradha Thakur, and also lifted investor sentiment. India’s benchmark Nifty 50 index rose nearly 3%, and the rupee strengthened over 1% to 90.40 per dollar in early trading.
“Lower tariffs will improve price competitiveness and allow Indian exporters to integrate more deeply into U.S. supply chains,” said S.C. Ralhan, president of the Federation of Indian Export Organisations. Moody’s Ratings added that reduced U.S. tariffs would reinvigorate India’s exports.
Despite announcements by Trump and Indian Prime Minister Narendra Modi, many details remain unclear. Indian refiners will need time to wind down Russian oil contracts before fully halting imports, and the government has not yet mandated a complete stop, Reuters reported. The Kremlin said it had heard no announcements from India about halting Russian oil purchases.
Moody’s warned that an immediate stop of Russian oil could disrupt India’s economic growth. “A complete shift away from Russian oil could tighten supply elsewhere, raise prices, and push inflation higher, given India’s status as one of the world’s largest oil importers,” the agency said.
The deal is expected to boost U.S. farm exports to India, U.S. Agriculture Secretary Brooke Rollins noted on social media, though no specific details were provided. Historically, India’s trade deals have excluded sensitive farm and dairy products to protect millions of subsistence farmers.