Editor’s Note
This article highlights a key development in international trade, reporting on Moody’s analysis of the new India-US trade agreement. The reduction of US retaliatory tariffs is expected to provide substantial relief to crucial Indian export sectors.
Moody’s Ratings said on Tuesday that the new trade agreement between India and the US will bring significant relief to Indian exporters. Under this agreement, the US government will reduce the existing 25% retaliatory tariffs on Indian goods to 18%. This move will particularly benefit labor-intensive sectors such as gems and jewellery, textiles, and apparel. These sectors contribute significantly to the country’s exports, and with the tariff reduction, their debt repayment capacity is expected to improve. US President Donald Trump confirmed this information after a phone conversation with Prime Minister Narendra Modi.
In its statement, Moody’s said this trade deal will breathe new life into India’s merchandise exports. The US remains India’s largest export market. In the first 11 months of 2025, approximately 21% of India’s total merchandise exports went to the US. Furthermore, the lower tariff rate will also prove positive for labor-intensive sectors like gems and jewellery, textiles, and apparel. According to Moody’s, these sectors are among the top export areas, and the tariff cut will improve their business and debt repayment capacity.
However, the US has already granted exemptions on the high 50% tariffs on pharmaceuticals and consumer electronics. Therefore, the new reduction will not have a direct impact on these. Moody’s also reported that India has reduced its crude oil purchases from Russia in recent months. However, the possibility of a complete halt is currently low, as it could affect India’s economic growth. This is particularly significant because energy imports play a crucial role in India’s economy.
Moody’s warned that if India completely moves away from Russian oil and becomes dependent on other sources, oil supply could tighten and prices could rise. This could also increase pressure on inflation. India is one of the world’s largest oil importers, so this move could have widespread effects. Experts say that while the tariff cut will provide immediate relief to exporters, it will be equally important to monitor energy security and global oil market conditions.