History has shown that trade announcements by US President Donald Trump often undergo revisions and reinterpretations, as per a report. The Indian government has not confirmed halting the purchase of Russian oil or reducing tariffs to zero against the US. JM Financial Institutional Securities’ report also mentions that there is no specified timeline for India to purchase $500 billion worth of US energy, technology, agriculture, coal, and other products.
Tariff policies have been subject to frequent changes over the past year, with announcements, revisions, escalations, and softening occurring in response to political and strategic objectives. Notably, the report cites instances like the US-Korea Free Trade Agreement and recent tariff increase threats against EU nations by Trump. Sectors like diamonds, jewellery, textiles, machinery, chemicals, and automobiles are expected to benefit from tariff reductions.
India holds a relatively advantageous position compared to other Asian emerging markets, with a new US tariff rate of 18%, lower than China’s approximately 30% and below several other countries like Bangladesh, Vietnam, Sri Lanka, Pakistan, Indonesia, and the Philippines at around 19-20%. This favorable tariff scenario could potentially help India expand its market share in labor-intensive industries such as textiles, the report suggests.
The potential US-India trade agreement is anticipated to boost dollar inflows, enhance the balance of payments, result in INR appreciation, and positively impact Indian equity markets. However, uncertainties exist regarding the scale of foreign institutional investments due to elevated valuations. Notably, the electronics segment, India’s primary export category to the US, has largely remained unaffected by previous tariffs due to exemptions granted.
The report also raises concerns that Indian agricultural products might face heightened competition if tariffs on US imports are reduced to zero. The US stands as India’s largest export destination, constituting about 20% of total exports. Lower tariffs are expected to facilitate improved bilateral trade flows and potentially revive India’s trade surplus with the US, which had been increasing annually until FY25 before declining in FY26 due to the imposition of high 50% tariffs.
