How India’s 18% US tariff translates into a near-60% competitive advantage

In relative terms, India now finds itself better placed than most South and Southeast Asian competitors

• India's trade-weighted tariff on US exports drops 64 percent post-deal
• India now has lower tariffs than most Asian rivals except Malaysia
• Deal boosts India's competitiveness in key export categories

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An 18 percent tariff under the India-US trade deal gives Indian exporters a far greater competitive edge than the headline number suggests. A Moneycontrol analysis shows the trade-weighted average tariff on Indian goods entering the US has dropped by nearly 64 percent from pre-deal levels, sharply strengthening India’s position against key Asian rivals.

Before the agreement, Indian exports faced a trade-weighted average tariff of about 29.7 percent, after accounting for exemptions and excluding Section 232 duties. This reflected the impact of the 50 percent tariff imposed by the US in August 2025, which applied to a broad range of Indian exports. Post-deal, the trade-weighted tariff drops to around 10.7 percent, a reduction of nearly 19 percentage points, or roughly two-thirds of earlier levels.

This sharp compression in effective tariffs explains why the agreement delivers a disproportionately large advantage, even though the headline tariff remains at 18 percent. The key lies in the composition of India’s exports. Many of the country’s high-value, labour-intensive categories were earlier clustered in the highest tariff slabs, where the rollback has been the steepest.

In relative terms, India now finds itself better placed than most South and Southeast Asian competitors. After the deal, India’s trade-weighted tariff of 10.7 percent is significantly lower than Bangladesh (19.9 percent), Sri Lanka (19.1 percent), Pakistan (18.2 percent) and Indonesia (16 percent). It is also lower than Vietnam’s 12.5 percent and broadly in line with Thailand (10.6 percent) and the Philippines (10.5 percent).

Only Malaysia, at 9.4 percent, retains a lower trade-weighted tariff, but even there, India has narrowed what was previously a substantial disadvantage.

This shift has direct implications for competitive export categories. A comparison of product lines where Indian exporters are now well positioned to challenge regional peers shows sizeable exposure. About $2.69 billion of Vietnam’s, $1.25 billion of Thailand’s, $1.07 billion of Indonesia’s, $636 million of Pakistan’s exports, and $434 million of Sri Lanka’s shipments fall into categories where India can now compete more aggressively.

The analysis includes categories where India’s exports were at most 30 per cent lower than those of its competitors.

In Pakistan’s case, nearly 15 percent of exports in these overlapping categories face heightened competitive pressure, reflecting the heavy concentration in textiles.

Taken together, the data show that India’s 18 percent tariff is less a constraint than it appears on paper. By sharply lowering the effective, trade-weighted burden on exports, the deal materially improves India’s pricing power in the US market, particularly in labour-intensive and price-sensitive segments.