India secured a permanent 10% tariff on most exports to the US, down from a proposed 12.5%, after months of tough negotiation that began in early 2025. This deal covers about 70% of Indian shipments to America and is set to take effect from June 2026.
Negotiations unfolded gradually. An interim agreement in February 2026 had already lowered reciprocal tariffs from 25% to 18%, but India pushed harder to bring its US-bound goods tariff down to 10% for key industries such as textiles, apparel, and leather products. These are sectors where India directly competes with countries that face steeper rates.
To balance this, India agreed to cut import tariffs on US industrial, food, and agricultural goods. Commerce Minister Piyush Goyal emphasized that India sought to maintain a tariff advantage over China, targeting a strategic edge in manufacturing trade.
The dispute over Russian oil imports also saw progress. Early in 2026, a 25% tariff on Indian imports connected to Russian oil was removed after New Delhi indicated it would reduce those purchases. also India's ban on imports linked to forced labor reportedly helped secure the preferential tariff rates.
Uncertainties remain amid ongoing probes
Despite this breakthrough, some risks persist. The US is still investigating whether India’s manufacturing capacity leads to subsidized overproduction. Should this probe result in findings against India, additional tariffs on certain sectors might follow, adding complexity to the trade relationship.
Goyal’s demand to keep an advantage over China also ties India’s fate to the evolving US-China trade dynamics. Should Washington and Beijing reach a settlement, India's relative benefit from this deal could diminish rapidly.
The current tariff arrangement falls short of a full Bilateral Trade Agreement, which remains under negotiation. Nearly 30% of Indian exports aren’t yet covered by the 10% tariff rate, leaving room for further developments in trade terms. Market watchers will keep an eye on those areas as talks progress.
On the market front, shares of Indian exporters to the US saw mild gains following the announcement, reflecting optimism about improved competitiveness but tempered by uncertainties ahead.
