50%, 25% or 18%? What tariff applies to Indian goods today

Trade deal to bring down tariffs to 18%

• US tariff on Indian exports dropped to 25 percent, may soon fall to 18 percent
• Further tariff cuts and zero duties expected after agreement signing in March
• Lower tariffs could boost India's competitiveness against other Asian exporters

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The tariff landscape for Indian exports to the US is currently in transition. The effective duty on February 7 stood at 25 percent, even though the recently announced India–US trade deal envisages a further reduction to 18 percent. But the lower tariff may soon come into effect, sources told Moneycontrol.

A government official on Saturday said the tariff rate will drop to 25 percent from February 7 after penal duties are removed, and then drop further to 18 percent once the US issues a reciprocal tariff reduction order, expected shortly after the joint statement. Additional concessions, including commitments to zero duties on both sides, are expected to take effect after the agreement is signed around March.

The US imposed a 50 percent tariff on Indian goods in August, comprising a 25 percent reciprocal tariff and an ad valorem duty of 25 percent linked to India’s imports of Russian oil.

That ad valorem levy was removed on February 6.

“India has committed to stop directly or indirectly importing Russian Federation oil, has represented that it will purchase United States energy products from the United States, and has recently committed to a framework with the United States to expand defense cooperation over the next 10 years,” the US executive order dated February 6 said, bringing down effective tariff on Indian goods to 25 percent.

A further reduction to 18 percent will require another executive order. The India-US joint statement released in the early hours of February 7 indicated that Washington intends to amend its earlier April 2 executive order that introduced reciprocal tariffs on several trading partners.

“The United States will apply a reciprocal tariff rate of 18 percent under Executive Order 14257 of April 2, 2025 (Regulating Imports With a Reciprocal Tariff to Rectify Trade Practices That Contribute to Large and Persistent Annual United States Goods Trade Deficits), as amended, on originating goods of India… and, subject to the successful conclusion of the Interim Agreement, will remove the reciprocal tariff on a wide range of goods including generic pharmaceuticals, gems and diamonds, and aircraft parts,” the joint statement read.

The two countries are expected to conclude the first tranche of the agreement by mid-March. That phase could bring additional tariff reductions for selected goods and potentially include quota-based concessions on certain exports from India.

Once implemented, the 18 percent tariff is expected to improve India’s competitive position relative to several South and Southeast Asian exporters. Earlier Moneycontrol analysis suggested that Indian exporters could gain an edge in about $2.6 billion worth of competing exports from the region, with over a tenth of Pakistan’s, Bangladesh’s and Sri Lanka’s shipments to the US potentially facing stronger competition from Indian goods.