India-US Tariff War: Trump's tariff bomb may be over, America may give relief to India

India-US Tariff War: The long-awaited moment for India now appears to be coming soon. The process of lifting the heavy tariffs imposed by the US on India may begin. On Thursday, India's Chief Economic Advisor (CEA) V. Ananth Nageswaran said at an event organized by the Merchants' Chamber of Commerce and Industry (MCCI) in Kolkata that the US could lift tariffs of up to 50 percent on some products imported from India within the next few weeks or months. This statement indicates a positive outcome of the ongoing trade talks between the two countries, which could ease tensions surrounding India's purchase of Russian oil amid the Russia-Ukraine war.

Expectations for Tariff Removal: Progress in Talks

CEA Nageswaran explained during the event that the US had imposed "reciprocal tariffs" on all major trading partner countries in April 2025 by declaring a national emergency under the International Emergency Economic Powers Act (IEEPA). India was initially subject to a 25 percent tariff, but in August 2025, an additional 25 percent punitive duty was added on Russian oil imports, bringing the total tariff to 50 percent. This duty is affecting key export sectors such as gems and jewelry, garments, footwear, furniture, industrial chemicals, textiles, seafood, and auto parts.

Nageswaran expressed optimism, stating, "I personally believe that at least the additional 25 percent punitive tariff will be removed within the next few months, if not sooner." He estimated that this relief could come after November 30, 2025, when the restrictions imposed under the IEEPA will be reviewed. Discussions are also underway to reduce reciprocal tariffs from 25 percent to 10-15 percent. This move will not only provide relief to Indian exporters but also strengthen economic ties between the two countries.

The Indian government has engaged in active diplomacy on this issue. Recently, Prime Minister Narendra Modi and President Donald Trump held a phone conversation, emphasizing a trade agreement. Commerce Ministry Special Secretary Rajesh Agarwal also met with US Trade Representative Brendan Lynch in New Delhi. These efforts indicate that the US is seeking to isolate India from rivals like China, particularly to pressure Russia. However, some experts believe that this process may be slowed by US domestic politics and inflationary pressures.

India's Exports Expected to Grow: Strength Despite Challenges

The CEA also highlighted the strength of India's economy. He stated that India's gross domestic product (GDP) grew at a rate of 7.8 percent in the first quarter of FY 2025-26, the highest level in five quarters. India's annual exports currently stand at around US$850 billion, and the government aims to increase this to US$1 trillion in the next few years. The United States is India's largest export market, with goods worth $87 billion shipped in 2024, but this could fall by 43 percent due to tariffs.

Sectors such as pharmaceuticals, electronics, and energy are currently exempt, accounting for 30 percent (approximately $27.6 billion) of total exports. However, labor-intensive sectors such as textiles and jewelry are at risk of a decline of up to 70 percent. Nageswaran said that the removal of tariffs will boost exports, and India's open economy will maintain a strong position in the global supply chain. Furthermore, the slight depreciation of the rupee (against the dollar) could give exporters a competitive advantage.

Why did the US impose heavy tariffs? Historical Background

President Trump adopted an aggressive policy to address the trade imbalance in his second term. In April 2025, a "national emergency" was declared under the IEEPA, imposing a blanket tariff of 10 percent on all countries, which was later increased on a country-specific basis. A 25 percent tariff on India came into effect in July-August 2025, and an additional 25 percent was added for Russian oil purchases (which indirectly funds the Ukraine war). Trump described this as part of his "America First" policy, but India called it "unfair and inconsistent," as major Russian oil buyers like China are subject to lower tariffs.

These tariffs are affecting 66 percent of US exports to India (approximately $86.5 billion), potentially leading to job losses. According to experts, this move could escalate a global trade war, but India's diplomatic strength makes a quick resolution possible.

Towards a Stronger Partnership

India-US relations are strategically strong, and the tariff dispute is merely a test of that. CEA Nageswaran's statement has enthused exporters, and the stock market is also reacting positively—the Nifty 50 hit a one-week high. If the negotiations are successful, it will not only boost trade but also deepen trust between the two countries. India should now focus on alternative markets, such as Europe and Southeast Asia, to navigate global uncertainties. Overall, there is hope that this dispute will be resolved soon, and India's export engine will regain momentum.