US Rescinds 25% Punitive Tariff on Indian Goods: A Strategic Trade Reset

NEW YORK/NEW DELHI – In a significant diplomatic breakthrough, the United States has officially removed the additional 25% punitive tariff on Indian goods, effective 12:01 AM EST, February 7, 2026. This move marks the end of a high-stakes trade standoff and signals a “reset” in the Indo-US economic partnership under the new Interim Trade Framework.

The “Oil-for-Trade” Pivot

The decision follows an Executive Order from the White House confirming that India has taken “significant steps” to align with U.S. national security interests. Central to this deal is India’s commitment to halt the direct or indirect import of Russian Federation oil.

In exchange for rolling back the 25% penalty—originally imposed in August 2025 due to New Delhi’s energy ties with Moscow—the U.S. has also reduced the reciprocal base tariff from 25% to 18%. This effectively slashes the total duty burden on many Indian exports from nearly 50% to just 18%, instantly restoring the competitiveness of “Made in India” products.

Key Highlights of the Deal

• $500 Billion Commitment: India has pledged to purchase approximately $500 billion worth of U.S. energy (LNG, coking coal), aircraft parts, and technology over the next five years.
• Sectoral Relief: Several high-value sectors, including Generic Pharmaceuticals, Gems & Jewelry, and Aircraft parts, will now enjoy zero-duty access to the U.S. market.
• Defense & Tech Expansion: The framework includes a 10-year roadmap for expanded defense cooperation and increased trade in high-end tech, such as Graphics Processing Units (GPUs) for AI data centers.
• Agricultural Safeguards: While India will lower barriers for U.S. products like tree nuts and apples, it has successfully protected sensitive sectors like dairy and staple grains (rice, wheat) from the deal.

Economic Impact

Trade experts suggest the new 18% tariff rate gives India a “Goldilocks” advantage. It is lower than the 20% faced by regional rivals like Vietnam and Bangladesh and significantly below the 35%+ duties currently applied to Chinese goods.

“This is a landmark framework that opens a $30 trillion market for our exporters,” stated Union Commerce Minister Piyush Goyal, noting that the deal would secure millions of jobs in MSME clusters across India.

A Word of Caution

The White House has clarified that the removal of the 25% surcharge is conditional. The U.S. Department of Commerce will monitor India’s energy procurement; any resumption of Russian oil trade could trigger the immediate reimposition of the punitive duties.