India started FY 2025-26 facing 50% US import duties on most of its exports. By February 2026, a bilateral deal brought that rate down to 18%. As of June 2026, the rate sits at approximately 10–18% depending on product category and ongoing legal challenges to Trump's tariff authority and a full Bilateral Trade Agreement (BTA) is in its final stages, with the US Ambassador stating 99% of the deal is done.
Here is everything that happened, in order, and what it means for Indian exporters right now.
US-India Trade: Starting Point
Before getting into tariffs, it helps to know the scale of what is at stake.
Bilateral goods trade between the US and India reached USD 129.2 billion in 2024. The US runs a trade deficit of roughly USD 45.7 billion with India, which is a key reason Trump targeted India in his tariff campaign. India's exports to the US worth USD 87 billion cover pharmaceuticals, gems and jewellery, textiles, engineering goods, and IT services.
The US is India's single largest trading partner, accounting for nearly 11% of India's total trade. That dependence is exactly why the tariff escalation in 2025 caused so much alarm in Indian industry circles.
Full Timeline: How US Tariffs on India Escalated (and Then Eased)
April 2025 — The First Blow
On April 2, 2025, the Trump administration announced reciprocal tariffs on most countries, targeting trade deficits. India was hit with a 26% rate, later adjusted to 25%.
On April 5, a 10% baseline tariff on all imports took effect. The additional India-specific 16% reciprocal component was paused for 90 days until July 9.
July–August 2025 — Escalation
The pause expired. The 90-day delay was extended once to August 1, and then the 25% combined tariff (10% baseline plus 15% reciprocal) became effective on August 1, 2025.
Then came an additional layer. On August 6, Trump announced a further 25% penalty tariff linked to India's purchase of Russian crude oil. This took effect August 27, 2025, pushing the total duty on most Indian goods to 50%.
For context: that was the highest tariff the US imposed on any major trading partner during this period. China faced 30%, Vietnam and the Philippines around 20%.
October 2025 — Damage Assessment
With 50% tariffs in place, Indian industry began reporting real damage. Engineering exports alone faced a projected USD 4–5 billion drop. Several textile and leather exporters began rerouting shipments to European and Gulf markets. The Indian rupee weakened, trading near Rs. 88.78 per USD.
Sectors with tariff exemptions - pharmaceuticals, semiconductors, energy products, critical minerals stayed relatively insulated. The Nifty Pharma Index actually gained over 3% during this period.
February 2026 — The Deal
On February 2, 2026, Trump announced on social media that the US and India had reached an understanding. On February 6, his administration signed an Executive Order eliminating the 25% Russian oil penalty tariff effective February 7, and issued a Joint White House Statement announcing a framework for an interim trade agreement.
Under this framework:
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The reciprocal tariff was reduced from 25% to 18%
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The punitive 25% oil-linked tariff was fully removed
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The effective US tariff on most Indian goods dropped to 18%
In exchange, India committed to eliminate or reduce tariffs on all US industrial goods and a broad range of agricultural products, halt Russian crude oil purchases, adopt stronger "Buy American" sourcing policies, and commit to purchasing USD 500 billion worth of US products over five years covering energy, aircraft parts, precious metals, technology, and coking coal.
Dairy, rice, wheat, and select spices were excluded from India's tariff reduction commitments.
February 20, 2026 — A Legal Twist
The US Supreme Court struck down Trump's IEEPA-based reciprocal tariffs as illegal. This created brief confusion about which rate applied to India.
The White House clarified that a new 10% global tariff under Section 122 would replace the IEEPA duties temporarily. For India, this meant the applicable rate temporarily dropped to around 10%, with the trade deal framework still being treated as valid by both governments.
Trump confirmed publicly that the India deal remains intact and stated his relationship with India is "fantastic."
February 25, 2026 — Solar Panels Hit Hard
Separately from the broader tariff negotiation, the US Department of Commerce announced preliminary countervailing duties (CVD) of 125.87% on imports of crystalline silicon photovoltaic cells and modules from India. This followed a petition filed in July 2025 by the Alliance for American Solar Manufacturing and Trade.
Indian solar stocks dropped sharply on the announcement date. The CVD targets alleged unfair government subsidies that the US claims allowed Indian manufacturers to undercut domestic American solar producers.
June 2026 — Where Things Stand Now
Negotiations on the full Bilateral Trade Agreement are in their final phase. A six-round negotiating session took place in New Delhi from June 1–4, 2026. US Ambassador Sergio Gor has stated that 99% of the deal is settled.
The remaining sticking point as it has been for years, is agriculture. The US wants greater market access for GMO crops and dairy products. India has publicly stated it will not compromise the interests of its farmers.
Both sides are expected to meet at the G7 summit in France (June 15–17, 2026), where Modi and Trump are anticipated to push toward finalizing the agreement.
Products Most Affected by US Tariffs
The sectors facing the highest tariff exposure under the 50% regime (August 2025–February 2026) were:
Textiles and Apparel — among the worst hit, with several exporters reporting turnover drops of up to 50%.
Gems and Jewellery — a major USD 10+ billion export category, hit with full 50% duties.
Leather and Footwear — facing 50%+ combined rates including anti-dumping duties.
Marine Products — carrying layered duties including anti-dumping and countervailing charges on top of the base tariff.
Chemicals, Automobiles, and Auto Parts — broad exposure across the board.
Agricultural Products — items like onions faced over 50.54% combined duties.
Dairy Products — buttermilk and fermented milk products faced rates over 80% at the peak.
Exempted Sectors (Protected Throughout)
The following categories remained at 0% throughout the tariff escalation and continue to be exempt:
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Pharmaceuticals (India supplies nearly 50% of the US generic drug market)
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Semiconductors and electronics
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Energy products (crude oil, natural gas)
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Critical minerals
These exemptions were a deliberate US policy choice removing them would have hurt American consumers and supply chains more than Indian exporters.
Economic Impact on India
The tariff escalation at its peak threatened USD 87 billion in Indian exports roughly 2.5% of India's GDP.
GDP growth forecasts were revised downward from 6.5% toward 6% during the peak tariff period. Engineering exports alone projected a USD 4–5 billion annual hit. MSMEs in textiles and leather faced competitiveness pressure against rivals in Vietnam and Bangladesh, which faced lower US tariff rates.
The February 2026 deal significantly reduced this exposure. With the effective rate now at 18% (or temporarily 10% following the Supreme Court ruling), Indian exporters have regained a degree of pricing competitiveness, though the rate is still higher than the pre-2025 baseline of roughly 3% for most Indian exports.
India's Response
India did not retaliate with tariffs of its own. The government's strategy focused on three tracks: diplomatic engagement, sectoral support for affected industries, and market diversification.
Commerce Minister Piyush Goyal ruled out direct subsidies but proposed interest subsidies, loan guarantees, and reduced certification costs for MSMEs. Industry bodies were encouraged to redirect shipments toward European, Gulf, and Southeast Asian markets.
India's leverage in negotiations was considerable. It supplies half of America's generic medicines, holds a trade surplus that the US wants to reduce through increased purchases, and sits at the centre of US efforts to build supply chains independent of China. That combination gave New Delhi room to negotiate without escalating.
What the Full BTA Could Mean
If the Bilateral Trade Agreement crosses the finish line, which the US Ambassador's "99% done" comment suggests is imminent the implications are significant.
India's target is to bring the US tariff rate down toward 10–12% from the current 18%. In return, India is reducing tariffs on US industrial goods, agricultural products, and addressing non-tariff barriers on medical devices and food products.
The USD 500 billion purchasing commitment over five years covers energy, aircraft parts, coal, metals, and technology a procurement pipeline that would reshape India's import mix and deepen supply chain ties with the US.
Both countries have set a "Mission 500" goal: more than doubling total bilateral trade to USD 500 billion by 2030, from roughly USD 129 billion in 2024.
Frequently Asked Questions
What is the current US tariff on Indian goods in 2026?
As of June 2026, most Indian goods face an 18% US tariff under the interim trade framework agreed in February 2026. Following the US Supreme Court's ruling that struck down IEEPA-based duties, the rate may temporarily be closer to 10% under a new Section 122 tariff, while the broader trade deal is being finalized.
Which Indian sectors are exempt from US tariffs?
Pharmaceuticals, semiconductors, energy products, and critical minerals remain at 0% duty. These exemptions have been maintained throughout the tariff escalation.
What happened to the 50% tariff on India?
The 50% tariff, which combined a 10% baseline, 15% reciprocal, and 25% Russian oil penalty was partially dismantled in February 2026. The 25% oil penalty was removed by executive order on February 7, 2026, and the reciprocal component was reduced from 25% to 18%.
Is the India-US trade deal final?
As of June 2026, a final Bilateral Trade Agreement has not been signed. The interim framework agreed in February 2026 is in effect, and negotiators completed their sixth round of talks in early June. The US Ambassador has described the deal as 99% complete.
What is the 126% duty on Indian solar panels?
In February 2026, the US Department of Commerce issued preliminary countervailing duties of 125.87% on Indian crystalline silicon photovoltaic cells and modules. This was a sector-specific action based on alleged government subsidies, separate from the broader reciprocal tariff framework.
Does India depend on the US economy?
The US is India's largest goods trading partner, accounting for around 11% of India's total trade and receiving nearly 18% of India's total exports. Key sectors like IT services, pharmaceuticals, textiles, and gems are heavily oriented toward the US market, which is precisely why the tariff escalation in 2025 triggered such strong diplomatic response.