India-US trade deal announced: Tariffs slashed to 18% from 50%; check details

India-US trade deal: India and the United States announced a historic trade deal on Monday, February 2, late evening. Both countries agreed to a trade deal after multiple rounds of negotiations in the last few months.

As part of the India-US trade deal, 25% reciprocal tariff on Indian exports to the US markets will be reduced to 18%.

The US administration has imposed a steep 50% tariff on Indian exports to the US markets. 25% additional tariff was imposed on India following the continued purchase of Russian oil, which the US claimed was indirectly financing Russia’s war against Ukraine.

The US Ambassador to India, Sergio Gor, has confirmed that the overall tariff rate on Indian exports has been reduced from 50% earlier to 18% as India has gradually reduced its import of Russian oil and has also agreed to buy more oil from the United States and, potentially, Venezuela, as per US President Donald Trump.

As per Donald Trump's post on the Truth Social account, India will move to reduce tariffs and non-tariff barriers against the US to zero. Also, India will purchase over $500 billion worth of US energy, technology, agricultural products, coal, and many other products.

Following the announcement of the India-US trade deal, GIFTy NIFTY saw strong traction, rising over 650 points or 2.76% at 25,820 level. Domestic markets are likely to react positively on Tuesday as the delay in the India-US trade deal was a key bottleneck for the markets. The India-US trade deal required multiple rounds of negotiations between the two parties.

Also, the India-US trade deal comes right after India and the European Union agreed for Free Trade Agreement (FTA) last week, on January 27, after two decades of negotiations. The European Union is one of the largest trading partners for India, accounting for €120 billion worth of trade in goods in 2024 or 11.5% of total Indian trade.

According to Deepak Agrawal, CIO -Debt, Kotak Mutual Fund, the reduction in tariff on Indian exports to the US is indeed a welcome move, expected to boost India's economy. This development is likely to improve the country's balance of payments (BOP) gap, strengthen the rupee, and increase foreign exchange (FX) reserves and attract foreign institutional investors (FIIs) who had been waiting on the sidelines. Additionally, Indian equities have become more attractive as their valuation premium has narrowed over the past year. This positive macroeconomic outlook is also expected to keep interest rates stable.