India has secured a more favourable position in global trade following the United States’ decision to lower tariffs on Indian products, a report released on Tuesday stated. The revised tariff rate places India below most ASEAN countries, enhancing its competitiveness relative to China.
US President Donald Trump announced that Washington and New Delhi had reached a trade understanding that reduces reciprocal tariffs on India from 25 per cent to 18 per cent.
The announcement did not clearly explain how authorities would treat the additional punitive duty linked to India’s imports of Russian oil. However, US Ambassador to India Sergia Gor later indicated that authorities would cap the effective tariff burden at 18 per cent, down from an earlier level of 50 per cent, the DBS Bank report noted.
DBS Group Research Senior Economist Radhika Rao said “At the onset, this breakthrough is unequivocally positive for the real economy/exports, sentiments as well as financial markets, while further details are awaited.”
Limited Relief for Certain Sectors
“To our understanding, tariffs under Section 232 of the Trade Expansion Act will be exempt from this tariff relief, similar to the treatment for other nations. This will apply to sectors like auto and auto parts (25 per cent tariff), steel and aluminium (50 per cent), lumber and copper, etc. This is likely to impact about a tenth of the export basket,” Rao contended.
India’s imports of crude oil, petroleum, and related products from Russia declined to $33 billion in FY26 so far, compared to $53.5 billion in FY25. The report attributed this moderation partly to reduced purchases by private refiners following US sanctions on specific Russian entities.
At the same time, the United States has risen from India’s sixth-largest supplier of crude and petroleum products in FY25 to fifth place in FY26 to date.
The report projected that total fuel imports from the US would increase by the end of the current financial year.
The tariff reduction will immediately benefit industries such as textiles, gems and jewellery, engineering goods, leather, and chemicals. Rao added that the full contours of the bilateral trade agreement would offer clearer insights into product-specific benefits, trade expansion, and future investment commitments.
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