US-India FTA: At 18% tariff, New Delhi stands ahead of China, South Asian countries
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In a big relief to India’s economy, the US on Tuesday finalised a long-anticipated deal, slashing tariffs on Indian goods from 50% to 18%—a level lower than those imposed on countries such as China and Pakistan. The move has been widely seen as a significant win for New Delhi, with Commerce and Industry Minister Piyush Goyal stating that “India gets the best trade deal among all the neighbouring countries with which it trades.”
However, some smaller South Asian economies, including Nepal and Bhutan, continue to enjoy even lower US tariffs, largely due to their limited trade volumes. Let’s take a look at where India stands in terms of US tariffs compared with other South Asian countries.
According to official data from the White House, China is currently subject to US tariffs of 34% on its exports while India faces a significantly lower rate of 18%. Although China is not a South Asian country, it has long been viewed as India’s principal economic rival.
Recent International Monetary Fund (IMF) data shows China topping the list of contributors to global real GDP growth in 2026 with a share of 26.6%, followed by India at 17%. The shifting dynamics prompted billionaire Elon Musk to remark that “the balance of power is changing” on the global map. Against this backdrop, the sharp reduction in US tariffs on Indian goods is expected to strengthen India’s competitive position and help it challenge China more effectively in the near future.
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Notably, following the deal, India now faces much lower tariffs than Bangladesh and Pakistan, which are subject to US tariffs of 37% and 19%, respectively.
PM Modi welcomed the deal
Announcing the trade deal, US President Donald Trump wrote on Truth Social, “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% to 18%.”
Prime Minister Narendra Modi welcomed the announcement, calling it a boost for Indian manufacturing and exporters. “Wonderful to speak with my dear friend President Trump today. Delighted that Made in India products will now have a reduced tariff of 18%,” Modi said, adding, “I look forward to working closely with him to take our partnership to unprecedented heights.”