Trump's tariff cut spells relief in India despite scant details

Impact of Tariff Cuts on India

By Shivangi Acharya and Manoj Kumar

Details of the Trade Agreement

NEW DELHI, Feb 3 (Reuters) - U.S. President Donald Trump's move to slash tariffs on Indian imports sparked a relief rally across the Asian country's markets on Tuesday, lifting sentiment among exporters and policymakers even as details of the agreement remained scant.

Market Reactions and Economic Sentiment

Trump announced a trade deal with India on Monday to cut tariffs to 18% from 50% in exchange for New Delhi halting Russian oil purchases and lowering trade barriers.

Potential Challenges Ahead

But Trump's social media post was not followed by any details of the deal from the White House or the Indian government.

An Indian government official said India has agreed to buy petroleum, defence goods and aircraft from the U.S., while partly opening up its guarded agriculture sector under the agreement.

New Delhi has also lowered tariffs on imported cars to address Washington's immediate demands, according to the official.

Trump said India will buy more American goods with purchases rising to over $500 billion, including energy, coal, technology, agricultural and other products. He did not specify any time-frame.

"India's tariff agreement with the U.S. removes its earlier disadvantage versus peers," said Neelkanth Mishra, chief economist at Axis Bank.

The deal helps affected Indian gems and jewellery, leather, plastics, ceramics and auto components and non-tech foreign investment, he added.

Among Asian peers, U.S. tariffs on goods from Indonesia stand at 19% while the rate for Vietnam and Bangladesh stands at 20%.

India's exports to the U.S. rose 15.88% year-on-year to $85.5 billion in January-November, while imports stood at $46.08 billion, Indian government data showed.

The announcement of the trade deal has reduced a great deal of global uncertainty, India's economic affairs secretary, Anuradha Thakur, said at an event in New Delhi on Tuesday.

It also lifted investor sentiment. India's benchmark stock index, the Nifty 50, was up nearly 3% and the rupee climbed over 1% to 90.40 per dollar in early trading.

"Lower tariffs will not only improve price competitiveness but also help Indian exporters integrate more deeply into U.S. supply chains,” said S.C. Ralhan, president of the Federation of Indian Export Organisations.

Reduction in U.S. tariffs on most Indian goods will reinvigorate India's exports to the U.S., Moody's Ratings said in a statement.

DEAL DETAILS SCANT

Despite the announcement by Trump and a post on X from Indian Prime Minister Narendra Modi, details of the deal remain scant.

Indian refiners will need a wind-down period to complete Russian oil deals before imports from that country can be halted, and they have so far not been ordered by the government to stop such imports, Reuters reported.

The Kremlin said it had heard no statements from India about halting purchases of Russian oil.

Moody's said immediately stopping Russian oil imports could be disruptive to India’s economic growth.

"A complete shift toward non-Russian oil could also tighten supply elsewhere, raise prices and pass through to higher inflation given that India is one of the world’s largest oil importers,” it said.

The India-U.S. trade deal will ensure more exports of American farm products to India's massive market, U.S. Agriculture Secretary Brooke Rollins said in a post on social media, without giving any details.

In the past, India's trade deals have typically excluded some sensitive farm and dairy items, as New Delhi maintains the need to protect millions of subsistence farmers.

(Additional reporting by Nikunj Ohri in New Delhi; Graphics by Vineet Sachdev; Editing byRaju Gopalakrishnan)