US-India Trade Bombshell: Tariffs Slashed to 18% — Rupee Soars, Sensex Explodes

Wednesday, February 4, 2026 9:15 AM UTC

Announced on February 2, 2026, the US-India commerce deal offers Indian exports significant tariff relief. From 25% to 18%, US reciprocal tariffs on Indian goods have been cut; the extra 25% punitive tariff connected with India's Russian oil imports has been absolutely waived, lowering the effective rate from about 50% to only 18%. India has promised to raise US imports to $500 billion across important industries like energy (LPG, LNG), technology, agriculture, and defense; at near-zero levels. In exchange, India has committed to steadily removing non-tariff restrictions and customs on American goods. This historic agreement signals a strategic change away from India's dependence on discounted Russian oil in favor of US energy supplies and closer bilateral economic relations.

Indian markets immediately showed enthusiasm as the Sensex and Nifty increased over 2% on February 3, thereby reversing recent declines. Lower tariffs will greatly improve India's main export industries' competitiveness (textiles, medications, IT services, and engineering goods), therefore enabling producers to grab market share against regional competitors like Vietnam and Bangladesh. While improving India's position in world supply chains, the agreement also offers a long-term GDP increase by means of more bilateral trade, greater FDI inflows, and "Buy American" procurement obligations.

Driven by robust FII inflows and good mood, the rupee appreciated significantly more than 1% to 90.27/USD on February 3, from near-92 levels. HSBC forecasts additional profits toward 88/USD by March-end, driven by short-term undervaluation and better trade balances. Though rising US imports could stress foreign exchange reserves and cause minor devaluation risks if the import surge quickens, the net effect is positive for the rupee and helps the RBI in its inflation management. Although precise implementation timetables and staggered tariff cuts stay subject to last-minute decisions, analysts see this as a big confidence enhancer for India.

Major Support and resistance

R1- 90.50

R2-91.33

R3- 91.65

Support

S1-89.58

S2-89.20

S3-88.30