India welcomes Trump tariff cut as investors cheer trade deal

US President Donald Trump’s decision to slash tariffs on Indian imports triggered a relief rally across India’s markets on Tuesday, improving sentiment among exporters and policymakers even as the finer points of the agreement remained unclear.

Trump announced a trade deal with India on Monday that would reduce tariffs to 18% from 50% in exchange for New Delhi halting Russian oil purchases and lowering trade barriers.

However, Trump’s social media post was not followed by detailed explanations from either the White House or the Indian government.

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An Indian government official said India had agreed to purchase petroleum, defence goods and aircraft from the United States, while partly opening its protected agriculture sector under the agreement. According to the official, New Delhi also lowered tariffs on imported cars to meet Washington’s immediate demands.

Another Indian official told Reuters the country agreed to grant zero tariffs to industrial goods entering India from the US.

Joint statement expected

After a “final understanding” of the deal is signed, both nations will share full details, India’s Trade Minister Piyush Goyal said late on Tuesday, adding that a joint statement would be issued soon.

Trump said, without providing a timeframe, that India would buy more US goods, with purchases rising to over $500 billion, including energy, coal, technology and agricultural products. Indian trade officials said the target would be achieved over five years.

“India’s tariff agreement with the U.S. removes its earlier disadvantage versus peers,” said Neelkanth Mishra, chief economist at Axis Bank. He added that the deal would support affected sectors such as gems and jewellery, leather, plastics, ceramics, auto components and non-tech foreign investment.

ALSO READ: Trade deal sees India buy more US oil, defence goods and aircraft

Among Asian peers, US tariffs on goods from Indonesia stand at 19%, while the rate for Vietnam and Bangladesh is 20%.

Indian government data showed exports to the United States rose 15.88% year-on-year to $85.5 billion between January and November, while imports stood at $46.08 billion.

“The announcement of the trade deal reduced a great deal of global uncertainty,” India’s economic affairs secretary, Anuradha Thakur, said in New Delhi on Tuesday.

Investor sentiment strengthened following the announcement. Indian shares recorded their best session in nine months, and the rupee rose 1.36% to 90.2650 per dollar, marking its strongest one-day gain since December 2018.

“Lower tariffs will not only improve price competitiveness but also help Indian exporters integrate more deeply into US supply chains,” said S.C. Ralhan, president of the Federation of Indian Export Organisations.

Moody’s Ratings said in a statement that lower US tariffs on most Indian goods would reinvigorate exports to the American market.

Details still limited

Despite Trump’s announcement and a post on X from Indian Prime Minister Narendra Modi, details of the agreement remain limited.

Indian refiners will require a wind-down period to complete existing Russian oil deals before imports can be stopped, and the government has not yet issued such an order, Reuters reported.

The Kremlin said it had heard no statements from India about halting purchases of Russian oil.

Moody’s warned that an immediate stop to Russian oil imports could disrupt India’s economic growth.

It could “could also tighten supply elsewhere, raise prices and pass through to higher inflation given that India is one of the world’s largest oil importers,” Moody’s said.

US Agriculture Secretary Brooke Rollins said on social media that the deal would ensure greater exports of American farm products to India’s large market, though no details were provided.

In previous trade agreements, India has excluded certain sensitive farm and dairy items, with New Delhi maintaining the need to protect millions of subsistence farmers.