India, US Finalise Trade Pact; Tariffs Cut to 18%, Punitive Duties Withdrawn

India and the United States on Tuesday finalised a bilateral trade agreement, reducing effective tariffs on Indian exports to 18% and withdrawing punitive duties imposed last year, officials said.

The pact ends months of trade friction and introduces a reciprocal tariff framework covering industrial goods, food products and selected agricultural commodities, while excluding sensitive farm sectors.

Punitive Tariffs Linked to Russian Oil Removed

The United States had imposed an additional 25% duty on Indian goods in 2025, taking effective tariffs on some products close to 50%. The levy was linked to India’s continued purchases of Russian crude oil.

Following India’s agreement to reduce and restructure these imports, the US has withdrawn the punitive duty, restoring a uniform 18% tariff rate on most Indian exports.

Food Imports and Premium F&B Get Duty Relief

Under the agreement, India will allow zero-duty access for a range of non-sensitive US agricultural products, including tree nuts, fresh fruits and select processed food ingredients.

Duties on US wines and spirits will be reduced in phases. High-grade edible oils used by food manufacturers are also included in the tariff reduction.

FMCG Exports Gain, Domestic Competition Rises

Lower US tariffs are expected to benefit Indian FMCG exporters of processed foods, tea, coffee and spices.

Companies with US exposure, including Nestlé India, ITC and Tata Consumer Products, are likely to see margin relief.

However, lower Indian tariffs on US packaged foods and nutrition products may increase competition in the domestic market, analysts said.

Agriculture and Dairy Excluded

Officials said sensitive sectors such as dairy, poultry, rice and wheat remain outside the zero-tariff list. Genetically modified food products are also excluded.

Energy and Commodity Trade Adjusted

As part of the agreement, India will increase purchases of US energy products and agricultural commodities such as cotton and soy-based animal feed. Officials said this would support domestic textile and livestock sectors.

Seafood Exporters See Major Relief

US duties on Indian seafood exports, which had risen sharply under punitive measures, have been reduced towards the 18% level.

The move is expected to restore competitiveness for Indian marine and aquaculture exporters, particularly shrimp producers.

Key Trade Numbers