Effective Saturday, 7 February 2026, the United States has officially removed the additional 25 per cent punitive duty on Indian imports, a move confirmed by an executive order from President Donald Trump.

The decision follows India’s strategic commitment to stop directly or indirectly importing Russian Federation oil and shift its energy procurement toward the U.S. and potentially Venezuela.

Under a newly released interim trade framework, baseline reciprocal tariffs on several Indian exports have also been slashed from 50 per cent to 18 per cent.

As part of this comprehensive reset, New Delhi has pledged to purchase 500 billion dollars worth of American energy, technology, and agricultural products over the next five years while expanding defence cooperation for the next decade.

US-India Trade Deal

The removal of these duties marks the conclusion of a high stakes trade standoff that began in August 2025. At that time, Washington imposed a 25 per cent penal levy specifically targeting New Delhi’s continued procurement of discounted Russian crude, which the U.S. administration described as an “unusual and extraordinary threat” to its national security.

This penalty was stacked on top of existing reciprocal tariffs, effectively pushing duties on many Indian goods to a staggering 50 per cent. The trade friction created immense pressure on Indian exporters in sectors like textiles and gems, who saw their price competitiveness vanish overnight.

The breakthrough followed intense negotiations between Prime Minister Narendra Modi and President Trump, resulting in India aligning its energy and security policies more closely with Washington in exchange for economic relief.

Economic Relief

The immediate withdrawal of the 25 per cent penal duty provides massive relief for Indian manufacturers across labor-intensive sectors. Key beneficiaries of the new 18 per cent tariff rate include the textiles, leather, footwear, organic chemicals, and artisanal industries.

In his executive order, President Trump stated that India has taken “significant steps” to address the national emergency and align with U.S. interests, though he warned that the Secretary of Commerce would monitor compliance and could recommend reimposing duties if Russian oil imports resume.

Union Commerce Minister Piyush Goyal hailed the framework as a victory for Indian exporters, highlighting that several items like gems, diamonds, and pharmaceutical products will now attract zero duty.

Additionally, the U.S. has agreed to lift national security related tariffs on Indian aluminium and steel parts, further opening access to a 30 trillion dollar market.

The MSME “Golden Phase”

The tariff reduction is being hailed as a “double dhamaka” for India’s Micro, Small, and Medium Enterprises (MSMEs), which dominate the textile, leather, and handicraft sectors.

For years, these small-scale exporters in hubs like Tirupur, Surat, and Agra had been absorbing the high costs of punitive duties, often offering 20 to 30 per cent discounts just to remain visible in the American market.

With the effective duty now capped at 18 per cent, these clusters are anticipating a surge in orders. Industry experts predict that the apparel sector alone could see a 20 per cent growth in volume, potentially returning thousands of factories to a full six-day work week and creating lakhs of new jobs for women and youth.

Cheaper Imports

While the deal opens doors for Indian exports, it also promises a cooler summer for Indian consumers. As part of the reciprocal framework, New Delhi has agreed to slash or eliminate tariffs on a wide range of American agricultural products.

This means that premium U.S. goods, including tree nuts (almonds and walnuts), fresh fruits like apples and cherries, and high-quality soybean oil, are set to become significantly cheaper in local Indian markets.

For the middle-class consumer, this trade reset translates directly into lower grocery bills and greater access to global food standards without the heavy “luxury” tax previously attached to imported American produce.

High Cost of Energy Pivot

However, this diplomatic victory comes with a calculated financial risk. By pivoting away from discounted Russian crude, which accounted for nearly 36 per cent of India’s oil imports and committing to American energy, India may face a higher annual import bill.

Analysts estimate that U.S. crude, while more secure, could be 20 to 30 per cent costlier due to the loss of “war-time” discounts and higher freight premiums of 6 to 8 dollars per barrel.

The success of this trade-off depends entirely on whether the export boom in textiles and gems can generate enough revenue to offset the increased costs of keeping India’s fuel tanks full.

The Logical Indian’s Perspective

At The Logical Indian, we believe that diplomatic dialogue and mutual compromise are the only sustainable paths to global economic stability.

While the removal of these tariffs is a positive development for Indian businesses, it highlights the delicate balancing act India must perform between its domestic energy security and its international strategic partnerships.

We must move toward a global order where trade is used as a tool for shared prosperity rather than a weapon of geopolitical coercion. A stable India-U.S. relationship is vital for global peace, but it must be built on the bedrock of sovereignty and mutual respect for each nation’s unique challenges.