'Hands India a sharp competitive advantage': Shamika Ravi on US cutting tariffs on India to 18%

Shamika Ravi, a member of the Prime Minister's Economic Advisory Council, on Tuesday said the new India-US trade deal gives Indian exporters a clear edge, after US President Donald Trump announced that reciprocal tariffs on Indian goods will be cut to 18% from 25% with immediate effect.

"This deal hands India a sharp competitive advantage: US tariffs on Indian goods now stand at 18% - lower than key Asian rivals (China at 34%, Vietnam/Bangladesh at 20%, Indonesia/Pakistan at 19%) - supercharging exports in textiles, leather, autos, IT, and manufacturing," Ravi said.

She pointed to the market's sharp reaction to the announcement, linking investor sentiment to expectations of stronger export momentum across multiple sectors. "Market responded accordingly: the Nifty 50 soared 5% at open (hitting record highs), Sensex jumped over 3,600 points, and textile/leather stocks rocketed up to 20%, with strong gains in IT, auto sectors etc. #PatientDiplomacy," Ravi said.

India's new 18% tariff rate now places it ahead of most countries in South Asia and Southeast Asia on relative access to the US market. Bangladesh, Sri Lanka, Taiwan, and Vietnam face 20%, while Pakistan, Indonesia, Malaysia, Thailand, and the Philippines are at 19%. Cambodia is also at 19%, leaving India with a narrower tariff burden than many competing export economies.

The tariff cut was announced late Monday after a phone conversation between Prime Minister Narendra Modi and US President Trump. "Out of friendship and respect for Prime Minister Modi and, as per his request, effective immediately, we agreed to a trade deal between the United States and India, whereby the United States will charge a reduced reciprocal tariff, lowering it from 25 per cent to 18 per cent," the US president said on social media.

Trump also said India would move to reduce its trade barriers against the US. India will "likewise move forward to reduce their tariffs and non-tariff barriers against the United States to zero". He added that Modi had committed to raising purchases of American goods significantly, including large imports across multiple sectors.

The US President said Modi also committed to "buy American" at a much higher level, in addition to over USD 500 billion dollars of US energy, technology, agricultural, coal, and many other products. Trump described the agreement as another step in strengthening ties between the two countries. "Our amazing relationship with India will be even stronger going forward. Prime Minister Modi and I are two people that get things done something that cannot be said for most," he said.