Trump's tariff cut spells relief in India despite scant details

DELHI:

United States President Donald Trump's move to slash tariffs on Indian imports sparked a relief rally across the Asian country's markets on Tuesday, lifting sentiment among exporters and policymakers even as details of the agreement remained scant.

Trump announced a trade deal with India on Monday to cut tariffs to 18% from 50% in exchange for New Delhi halting Russian oil purchases and lowering trade barriers.

But Trump's social media post was not followed by any details of the deal from the White House or the Indian government.

An Indian government official said India has agreed to buy petroleum, defence goods and aircraft from the US, while partly opening up its guarded agriculture sector under the agreement.

New Delhi has also lowered tariffs on imported cars to address Washington's immediate demands, according to the official.

Trump said India will buy more American goods with purchases rising to over $500 billion, including energy, coal, technology, agricultural and other products. He did not specify any time-frame.

"India's tariff agreement with the US removes its earlier disadvantage versus peers," said Neelkanth Mishra, chief economist at Axis Bank.

Read: Deal sealed as Trump cuts India tariffs to 18%

The deal helps affected Indian gems and jewellery, leather, plastics, ceramics and auto components and non-tech foreign investment, he added.

Among Asian peers, US tariffs on goods from Indonesia stand at 19% while the rate for Vietnam and Bangladesh stands at 20%.

India's exports to the US rose 15.88% year-on-year to $85.5b in January-November, while imports stood at $46.08b, Indian government data showed.

The announcement of the trade deal has reduced a great deal of global uncertainty, India's economic affairs secretary, Anuradha Thakur, said at an event in New Delhi on Tuesday.

It also lifted investor sentiment. India's benchmark stock index, the Nifty 50, was up nearly 3% and the rupee climbed over 1% to 90.40% in early trading.

"Lower tariffs will not only improve price competitiveness but also help Indian exporters integrate more deeply into US supply chains,” said SC Ralhan, president of the Federation of Indian Export Organisations.

Reduction in US tariffs on most Indian goods will reinvigorate India's exports to the US, Moody's Ratings said in a statement.

Deal details scant

Despite the announcement by Trump and a post on X from Indian Prime Minister Narendra Modi, details of the deal remain scant.

Indian refiners will need a wind-down period to complete Russian oil deals before imports from that country can be halted, and they have so far not been ordered by the government to stop such imports, Reuters reported.

The Kremlin said it had heard no statements from India about halting purchases of Russian oil.

Moody's said immediately stopping Russian oil imports could be disruptive to India’s economic growth.

"A complete shift toward non-Russian oil could also tighten supply elsewhere, raise prices and pass through to higher inflation given that India is one of the world’s largest oil importers,” it said.

The India-US trade deal will ensure more exports of American farm products to India's massive market, US Agriculture Secretary Brooke Rollins said in a post on social media, without giving any details.

Read more: Indian opposition hits Modi over US-India trade deal, demands full details

In the past, India's trade deals have typically excluded some sensitive farm and dairy items, as New Delhi maintains the need to protect millions of subsistence farmers.

Amid the tariff deal, Indian refiners face the practical challenge of gradually reducing Russian oil imports. They have not been told by the government to stop buying Russian oil and would need a wind-down period to complete purchases already in process, two refining sources said on Tuesday.

While India has slowed Russian oil purchases, refineries have already booked cargoes loading in February and arriving in March, the sources said, declining to be named as they were not authorised to speak with the media.

Indian Oil Corp, Bharat Petroleum Corp and Nayara have been regular buyers of Russian oil.

Reliance Industries, which paused buying Russian oil for a month, will buy up to 150,000 barrels per day from February, a company executive said last week.

The four companies and India's oil ministry did not respond to emails seeking comment.

Last week, sources said that India was preparing to reduce Russian oil imports to below onw million barrels per day, with one saying such imports eventually would total 500,000–600,000 bpd.

India's Russian oil imports peaked at around 2m bpd last June.

Trump said on Saturday that India would buy Venezuelan oil, but refining sources said on Tuesday that only Reliance and Nayara had the refining capability to process heavy crude in large volumes. State refiners, they said, could not simply switch to Venezuelan oil and would only be able to replace less than 10% of Russian supplies.

India's Russian oil imports fell to their lowest level in two years in December, data from trade sources showed.

Indian refiners have been buying more from Middle Eastern, African and South American countries as they scale back Russian oil purchases, refining sources said last month.