India locked in a permanent 10% US tariff on most of its exports, undercutting a proposed 12.5% rate that would have applied across the board. The structure covers approximately 70% of Indian exports to the US and takes effect in June 2026. A US probe into excess manufacturing capacity could still add sector-specific duties on top.
India negotiated its US tariffs down rather than up — something most trading partners of the current US administration have struggled to do. New Delhi secured a permanent 10% US tariff on most of its exports, dodging a proposed 12.5% rate that would have applied across the board. The new structure covers approximately 70% of Indian exports to the US, effective June 2026.
Textiles and leather goods draw the 10% rate
The deal did not materialize overnight. Negotiations began in February 2025, and an interim agreement in February 2026 first cut reciprocal tariffs from 25% to 18%.
New Delhi then pushed the number lower for the bulk of its exports. The permanent 10% rate applies to textiles, apparel, and leather goods, sectors where India directly competes with countries facing far steeper US tariff walls. In return, India committed to reducing its own tariffs on US industrial goods, food, and agricultural products.
Washington also lifted an additional 25% tariff on Indian imports related to Russian oil purchases in early February 2026, after India signaled its willingness to reduce those purchases. India's decision to ban imports produced using forced labor was a key factor in securing the preferential tariff rate.
Goyal ties any deal to a tariff edge over China
Commerce Minister Piyush Goyal has been clear about the strategy: India will not finalize any deal unless it retains a tariff advantage over competitors like China. But that insistence cuts both ways, making India's trade strategy inherently reactive to whatever happens with US-China relations. If Washington and Beijing reach their own accommodation, India's preferential positioning could narrow quickly.
A capacity probe could still add duties
Meanwhile, the US is still investigating excess manufacturing capacity, a probe that could result in additional tariffs on specific sectors. If Washington determines that Indian manufacturers are benefiting from subsidized overcapacity, the 10% rate could get supplemented with sector-specific duties.
Negotiations for a more comprehensive Bilateral Trade Agreement are still ongoing. The remaining 30% of Indian exports fall outside the 10% rate, and subsequent rounds will set their treatment.
Source: Crypto Briefing
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