After nearly a year of uncertainty, brinkmanship, and tariff pressure, Washington and New Delhi have finally recalibrated their trade relationship. US President Donald Trump’s announcement of a reduced 18 percent tariff on Indian exports, down sharply from the punitive 50 percent rate imposed last year, marks a turning point not only for India’s economy but also for the wider South Asian trade landscape.

The deal, unveiled through social media posts by Trump and Indian Prime Minister Narendra Modi, comes at a strategically sensitive moment. India has just finalized a trade agreement with the European Union, global supply chains remain fragile, and the United States is aggressively reshaping trade relationships through selective tariff diplomacy. For South Asia-where countries like Bangladesh, Pakistan, and Sri Lanka compete closely with India in labor-intensive exports-this agreement carries implications far beyond bilateral ties.

When the US imposed a 50 percent tariff on Indian goods in August last year, markets reacted sharply. The rupee weakened, equities slid, and foreign institutional investors accelerated capital outflows. The tariff acted as a blunt instrument, aimed partly at pressuring India over market access and, more controversially, its continued purchases of Russian oil.

The newly announced 18 percent tariff rate, confirmed by a White House official to the Hindustan Times, removes that overhang. Importantly, the additional 25 percent levy linked to Russian oil purchases will be dropped, signaling Washington’s willingness to compromise for strategic alignment.

For India, this represents a dramatic repositioning-from being subject to the highest US tariff in Asia to enjoying the second-best rate after Japan. By comparison, US consumers pay 20 percent tariffs on imports from Bangladesh and Vietnam, 19 percent on goods from Pakistan, Malaysia, Thailand, and Cambodia, and a steep 37 percent on........

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