India Tariff Relief: US Signals Duty Cut to 10% in 2026

A New Chapter in US-India Trade Relations

Indian exporters may soon find significant relief as the White House has signaled a potential reduction in US tariffs on Indian goods to 10 percent. This development follows a landmark US Supreme Court ruling that curtailed President Donald Trump's authority to impose emergency tariffs, prompting a global restructuring of American trade duties. For India, this move could lower the tariff barrier from a staggering 18 percent, and in some cases as high as 50 percent, providing a much-needed boost to export competitiveness in the American market.

The Path from 50% Tariffs to Potential Relief

The trade relationship between the two nations has been fraught with uncertainty. In 2025, the US administration imposed steep tariffs on Indian imports, reaching up to 50% on a wide range of goods. This rate was a combination of a 10% baseline duty, a 25% reciprocal tariff, and an additional 25% punitive duty linked to India's continued purchases of Russian crude oil. This placed India among the most heavily taxed trading partners of the US, alongside Brazil, and significantly higher than rates for China (30%) or Vietnam (20%). The move triggered a sharp response from Indian trade bodies, who warned of severe consequences for exporters already operating on thin margins.

Data from 2025 reflected the strain, with Indian exports to the US falling by 20.7 percent between May and November of that year. The high tariffs impacted over half of India's $17 billion in annual exports to the US, creating significant headwinds for key industries.

The Supreme Court Ruling: A Game Changer

The recent shift in US trade policy stems directly from a Supreme Court decision that limited the president's use of emergency economic powers. This ruling forced the administration to dismantle its existing tariff structure and establish a new, more uniform framework. According to a White House official, this global reset involves establishing a new 10% baseline tariff that will apply to major trading partners. Countries like India, which were previously subjected to higher, country-specific duties, are now expected to see their rates rolled back to this new baseline. President Trump acknowledged the change, framing it as a "little flip" in trade terms while emphasizing that the broader bilateral trade deal with India remains intact and that his relationship with Prime Minister Narendra Modi is strong.

Sector-Specific Impact and Relief

The previous 50% tariff regime had a debilitating effect on several of India's core export sectors. These industries are now poised to be the biggest beneficiaries of the potential reduction to 10%.

• Textiles and Apparel: This sector, which exported $1.68 billion to the U.S. in 2024, faced tariffs between 45% and 50%. The high duties eroded India's cost advantage over competitors like Vietnam and Bangladesh.
• Gems and Jewellery: As India's second-largest export category to the U.S. at $1.15 billion, this industry was hit with a 50% tariff, up from a pre-2025 rate of just 1.8%. The Gems and Jewellery Export Promotion Council had projected significant losses due to this.
• Industrial and Electrical Machinery: Valued at $18.97 billion, this was India's largest industrial export to the US. It faced tariffs of 30%, which threatened to undermine its competitiveness.

Broader Economic Implications

A reduction to a 10% tariff offers substantial breathing room for the Indian economy. It aligns India's tariff rate with that of other key partners like the United Kingdom and provides a more predictable trade environment. The move is expected to restore confidence among exporters and could help revive export growth, which had slowed under the weight of the punitive duties. This development supports the ambitious goal set by both nations to more than double bilateral trade from $191 billion to $100 billion by 2030. While an earlier interim deal that reduced tariffs from 25% to 18% was expected to provide a 0.2 percentage point boost to India's GDP, the new 10% baseline could offer even greater economic benefits.

The Road Ahead

While the signal from the White House is a positive development, the situation remains fluid. The Supreme Court's ruling has opened the door for further legal and political reviews of US trade policies. Indian exporters and policymakers will be watching closely for the official implementation of the new tariff structure. The Federation of Indian Export Organisations (FIEO) has noted that while such pressures are challenging, they also encourage exporters to diversify their markets and de-risk their operations. This tariff reset provides a critical opportunity for India to strengthen its position in the US market and work towards a more stable and balanced trade relationship. The focus now shifts to finalizing the terms and ensuring that the benefits of lower tariffs translate into tangible growth for Indian industries.