Lower than Pakistan, China: How trade deal with US gives India its edge back against South Asian competitors

India-US trade deal sealed: In a big breakthrough, India and the US have announced a trade deal, after US President Donald Trump and Prime Minister Narendra Modi spoke on phone. With the trade deal, India has secured an 18% reciprocal tariff rate for its goods exported to the US. Trump has said that the tariff on US exports to India will be reduced to zero.PM Narendra Modi welcomed the trade deal calling it a ‘wonderful announcement’. “Wonderful to speak with my dear friend President Trump today. Delighted that Made in India products will now have a reduced tariff of 18%. Big thanks to President Trump on behalf of the 1.4 billion people of India for this wonderful announcement. When two large economies and the world’s largest democracies work together, it benefits our people and unlocks immense opportunities for mutually beneficial cooperation,” PM Modi posted on X (formerly Twitter).

“President Trump’s leadership is vital for global peace, stability, and prosperity. India fully supports his efforts for peace. I look forward to working closely with him to take our partnership to unprecedented heights,” he added.

Trump Tariff Rate For India Lower Than Pakistan, China

With this deal, India bags a place among countries facing one of the lowest tariff rates from the Donald Trump administration. Importantly, India has emerged with a more favourable tariff rate than many of its export rivals across the South and Southeast Asia region.India gains a competitive edge over regional peers, facing lower duties than Indonesia, which is subject to a 19% tariff, and Bangladesh and Vietnam, both of which face levies of 20%.The gap is even wider when compared with China, where US tariffs stand at a much higher 34%. India also holds an advantage over Pakistan, which continues to face tariffs of 19%.Also Read | India-US trade deal: 25% penal tariffs linked to Russian oil gone? Here’s what we knowWhen Trump announced reciprocal tariffs on Liberation Day in April 2025, India was hit with a 26% tariff rate. As negotiations for a trade deal continued, Trump imposed a 25% tariff rate on India effective from August 2025. This was later hiked to 50%, with the 25% additional penal tariff being for India’s crude oil imports from Russia. The Trump administration accused India of indirectly financing Russia’s war against Ukraine.

Reports suggest that the 18% reciprocal tariff rate now effectively also removes the 25% tariff on India for Russia crude oil procurement. An official confirmation on the same is awaited.Details of the India-US trade deal are yet to be revealed, though Trump’s post makes a series of claims: from India’s promise to stop buying Russian crude, reducing tariffs on US goods to zero, agreeing to step up US oil imports to buying $500 billion of US products across sectors.Also Read | India-US trade deal: Top 7 points Trump says he agreed on with PM ModiTrump posted on Truth Social, “It was an Honor to speak with Prime Minister Modi, of India, this morning. He is one of my greatest friends and, a Powerful and Respected Leader of his Country. We spoke about many things, including Trade, and ending the War with Russia and Ukraine. He agreed to stop buying Russian Oil, and to buy much more from the United States and, potentially, Venezuela. This will help END THE WAR in Ukraine, which is taking place right now, with thousands of people dying each and every week! Out of friendship and respect for Prime Minister Modi and, as per his request, effective immediately, we agreed to a Trade Deal between the United States and India, whereby the United States will charge a reduced Reciprocal Tariff, lowering it from 25% to 18%. They will likewise move forward to reduce their Tariffs and Non Tariff Barriers against the United States, to ZERO. The Prime Minister also committed to “BUY AMERICAN,” at a much higher level, in addition to over $500 BILLION DOLLARS of U.S. Energy, Technology, Agricultural, Coal, and many other products. Our amazing relationship with India will be even stronger going forward. Prime Minister Modi and I are two people that GET THINGS DONE, something that cannot be said for most. Thank you for your attention to this matter!”