For months, the economic relationship between india and United States felt like a high-stakes standoff. But on Monday, February 2, 2026, the narrative shifted from friction to friendship as President Donald Trump and Prime Minister Narendra Modi finalised a landmark trade deal that reshapes the global manufacturing terrain.
Reacting to the India-US trade deal, Harini Rajagopalan, Co-Founder & CEO of Basil told The Free Press Journal, "The growing momentum in India US trade feels encouraging. It reinforces our belief that the US is a meaningful growth market for Indian brands with strong design sensibilities and global ambition. Indian products backed by thoughtful design and quality truly belong on the global stage. A stronger India US trade relationship makes it easier for Indian brands to think beyond borders, not as exporters chasing volume, but as global brands focused on building awareness, credibility, and long-term trust. This is a defining moment for Indian founders to think bigger."
From penalties to partnership
The road to this agreement was rocky.
In August 2025, India found itself in a "tariff trap." US had imposed a staggering 50% total tariff on Indian goods -- a combination of a 25% "reciprocal" tariff and an additional 25% penalty.
The sticking point? India’s continued purchase of crude oil from Russia amid the ongoing conflict in Ukraine.
However, the new deal effectively wipes the slate clean. By committing to halt Russian oil purchases and pledging to "Buy American" for energy and technology needs, India saw its effective tariff rate plummet to 18%. In return, India will move toward reducing its own trade barriers on US products to zero.
"Prime Minister Modi and I are two people that GET THINGS DONE," Trump announced on social media, emphasising that the deal was struck "out of friendship and respect."
New competitive edge
The 18% rate is more than just a number, it is a strategic advantage. It places India in a "sweet spot" in the global supply chain, which is lower than its regional competitors but within reach of America's traditional allies. Here’s how US duties on Indian goods compare to other nations.
Why this matters for the Made in India label
For Indian exporters in sectors like textiles, pharmaceuticals and engineering, this 32-point drop in tariffs is a lifeline.
Indian goods are now officially more affordable for American buyers than those from Pakistan (19%), Vietnam (20%) and Bangladesh (20%). With China facing a 37% tariff, the gap between Indian and Chinese goods has widened significantly, making India a far more attractive "plus-one" for companies looking to diversify away from Beijing.
Financial markets have already signalled their approval. On Tuesday morning, the Indian rupee surged and stocks for major exporters saw double-digit gains.
Road ahead
While the immediate relief is historic, the deal comes with heavy commitments. India is moving its energy strategy toward the US and potentially Venezuela to fill the gap left by Russian crude.
Meanwhile, US farmers and tech giants are eyeing the Indian market as non-tariff barriers begin to dissolve.
