Indian exporters welcome tariff reprieve, but deal with US stirs unease for others
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US President Donald Trump shaking hands with Indian Prime Minister Narendra Modi at the White House in Washington on Feb 13, 2025.
PHOTO: AFP
- Trump announced reduced tariffs on Indian goods (50% to 18%), stating India "agreed" to buy more US goods and oil.
- Indian exporters are relieved by the tariff cut, expecting increased competitiveness in US markets, especially for labour-intensive sectors.
- Despite domestic political controversy over the deal's concessions, analysts believe India will maintain ties with Russia, rooted in defence and nuclear cooperation.
AI generated
NEW DELHI – Indian exporters expressed relief after US President Donald Trump announced a sharp tariff reduction on Indian goods, even as the deal triggered political controversy domestically over whether India had conceded far too much on ties with Russia and oil imports.
Mr Trump announced on Feb 2 that the United States would reduce the tariff on Indian goods
He said that India, in return, had “agreed” to stop buying Russian oil, increase oil purchases from the US and Venezuela, and buy US$500 billion (S$635 billion) worth of US products, including technology and farm products.
India’s overall goods imports in the 2024-25 financial year stood at US$720.24 billion.
The Indian government has avoided any mention of Russian oil purchases or opening up India’s market with zero tariffs for US goods in its reactions.
Commerce and Industry Minister Piyush Goyal said earlier on Feb 3 that the trade deal is under “final stages of detailing” between the negotiating teams of both countries.
Despite little clarity on the deal, it was hailed by Indian businesses.
The tariff cuts are expected to make India’s exports in labour-intensive sectors like textiles and seafood marginally more competitive in the US market compared with countries like Vietnam and Bangladesh, which both face a 20 per cent duty.
Exporters said the 50 per cent tariff had hurt demand and forced many to offer deep discounts, eating into profitability.
Mr Anil Buchasia, owner of Amrit Exports, said his immediate thought was about expanding his business, which had been put on hold over the past year.
“The sentiment was weak (over the past year) and the enthusiasm was low. Now, the position is very favourable for India,” he said. “Customers were not forthcoming. Now, I have been receiving congratulatory messages from my customers. Nobody consumes like the US.”
The deal, dubbed “father of all deals” on social media, comes a week after India agreed on a free trade agreement (FTA) with the European Union, described by both sides as “the mother of all deals”
After Mr Trump imposed a 50 per cent tariff on India in August 2025, the South Asian country struck trade deals with Britain, New Zealand and Oman.
“Diversification will go on. Earlier, we were in a comfort zone. This tariff nudged us. That will go on. People will be sceptical to stick to one case. The EU deal – this has come as a very good thing,” said Mr Alok Sonkhiya, president of the Jewellers Association, Jaipur.
“In a way, in the long run, this nudge was important for Indian exporters. Don’t put all your eggs in one basket.”
Analysts noted that both sides were shaping the narrative for their domestic audience.
The US has promoted the deal as expanding access for US farm products in India, apart from oil.
US Secretary of Agriculture Brooke Leslie Rollins said the “new US-India deal will export more American farm products to India’s massive market, lifting prices and pumping cash into rural America”.
Prime Minister Narendra Modi, who was praised for securing the deal at the parliamentary meeting of his ruling alliance, said he was “delighted” by the reduction in tariff, underlining the economic potential in the deal.
“Big thanks to President Trump on behalf of the 1.4 billion people of India for this wonderful announcement,” Mr Modi said in a post on X. “When two large economies and the world’s largest democracies work together, it benefits our people and unlocks immense opportunities for mutually beneficial cooperation.”
Mr Goyal said the trade deal protects farmers. Agriculture and dairy access were key sticking points in the deal for the US.
He said the deal “will provide huge opportunities for the people of India and will protect the sensitive sectors and the interests of our agriculture and dairy sector in full respect”.
Home Minister Amit Shah called it a historic deal, while External Affairs Minister S. Jaishankar said it would spur growth in both economies.
Opposition parties are not impressed
Opposition parties wondered if the deal was a win-win for India, given Mr Trump’s statements on tariff-free access for US products in the Indian market and India cutting Russian oil imports.
Opposition party Congress questioned Mr Trump’s statement asserting that India would sharply boost imports of US goods, arguing that such a move would run counter to the government’s aim of boosting domestic manufacturing and protecting India’s agriculture sector.
“We need to understand why a trade deal stuck for about four months was suddenly finalised last evening,” Congress leader Rahul Gandhi said, adding that “there was huge pressure on Prime Minister Modi”.
In response, Mr Goyal accused Mr Gandhi of misleading the country, and other opposition leaders of being “anti-India” and misleading Indians.
India was among the largest buyers of discounted Russian oil after the West imposed sanctions on Russia for its invasion of Ukraine in 2022. But India has been cutting back on Russian oil imports and buying more from Middle Eastern, African and South American countries.
Amid the domestic debate on Russian oil, analysts predicted the India-US trade deal would not substantially alter India’s strategic ties with Russia or immediately reduce the trust deficit with the US.
India’s ties with Russia remained, rooted in decades of defence and nuclear cooperation, with the two sides looking to expand cooperation and widen people-to-people movement.
“It is very unlikely that India would let its relationship with Russia collapse because of this arrangement with Mr Trump. After all, Trump himself is trying to find a modus vivendi with Russia,” said Professor Harsh V. Pant, vice-president of studies and foreign policy at the Observer Research Foundation in New Delhi.
“If you go back to Mr (Vladimir) Putin’s visit to India to broaden India-Russia ties, I think India will continue to work with Russia in that direction,” he said, referring to the President’s trip in December 2025
He also noted that the deal would not fully repair India-US ties.
“I think beyond this deal it would require a sustained effort to rebuild trust and ensure structural imperatives, which is to see and work towards a peaceful and stable Indo-Pacific that continues to guide this partnership,” Prof Pant said.
