shivaji sarkar
The US tariff cut is supposed to be positive for Indian trade and markets. The US administration is propagating it as a great favour to India. The drumbeats announce that a 50 percent tariff is cut to 18 percent.That looks great. The reality is far away from it.
Yes, President Donald Trump imposed a 25% tariff and warned of an additional 25% penalty if India continued buying Russian oil. The penalty remained only a threat, as New Delhi moved quickly to comply. The Trump administration has approached trade talks like a hard-nosed corporate negotiator—using threats as leverage and extracting concessions without necessarily enforcing them.
Trump has effectively raised tariffs on Indian goods by about 16 percentage points compared with the 2024 baseline. Indian exports faced average levies of just 2.4% in 2024. Now, even after a nominal 7-point reduction from the proposed 25 percent rate, the revised tariff still stands at 18 percent. In effect, Indian goods will face an additional 15.6–16 percentage points over the 2024 level — a steep increase disguised as a concession.Plus, all goods from the US, as per the announcements, would have duty-free entry to India. These include American farm goods.
Opening India’s market to US agricultural imports has been welcomed by US Agriculture Secretary Brooke Rollins, who said, “Thank you for once again delivering for our American farmers. The new US–India deal will expand exports of American farm products to India’s vast market, lifting prices and pumping cash into rural America.” She noted that the US faces a $1.3 billion agricultural trade deficit and sees India’s growing population as a critical opportunity for American producers.
How would Indian farmers gain or suffer remains the big question. Commerce Minister Piyush Goyal says that there would not be any dairy product entry. If so, a small relief.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. The reset has strengthened the rupee but not the stock market sentiments.
The tariff cut does not improve 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.
Effectively, Indian exports would be highly expensive. The exporters would have to sweat hard to keep products competitive. Would new duties help Indian products compete better against regional rivals such as Vietnam, Bangladesh and Indonesia, where US tariffs are effectively lower?
$ 500 Billon Imports
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. Presently India has a trade surplus of $ 42 billion.
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 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.
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.
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. 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.
Short-Term GDP, Other Aspects
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 is said that there are some other considerations as well. 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 percent.
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 in BSE index.
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. The gains are incremental 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.
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.—INFA
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