The United States may offer India more favorable tariff terms than competing Asian economies as negotiations on the first phase of the India–US trade agreement approach completion. Government sources have indicated that Washington is showing an accommodative stance toward New Delhi’s demand for a tariff framework that improves the competitiveness of Indian exports. The discussions could also reopen the 18% reciprocal tariff rate outlined in the framework announced in February 2026.
For India, the negotiations are about securing an advantage over rival exporters, not merely obtaining a lower tariff in isolation. Countries such as Vietnam, Bangladesh, Thailand and Indonesia compete with Indian manufacturers for orders in the US market, particularly in textiles, apparel, leather and footwear. A preferential tariff structure could improve Indian exporters’ pricing power, although the final agreement remains subject to negotiations and has not yet been confirmed.
Key Takeaways
- The US may consider lower or more favorable tariffs for India compared with competing Asian economies.
- The first phase of the proposed India–US Bilateral Trade Agreement is nearing completion, according to officials.
- India is seeking a competitive advantage over exporters in Vietnam, Bangladesh and other Asian markets.
- The February 2026 framework envisaged an 18% US reciprocal tariff on covered Indian goods.
- Tariff changes in 2026 have complicated comparisons between countries and increased uncertainty over the final duties.
- A preferential arrangement could benefit labor-intensive industries, but the outcome depends on the final terms and implementation.
Why the US May Offer India Better Tariff Terms
India has argued that the trade agreement should place its exporters on a competitive footing with manufacturers in other Asian economies. According to Moneycontrol, government sources said Washington had shown an accommodative stance toward India’s proposals.
US Secretary of State Marco Rubio also indicated that obtaining better terms was a central purpose of negotiating a trade agreement. His remarks came as both governments continued discussions over the proposed pact.
The potential changes would build on the framework announced in February 2026, when the two countries outlined an arrangement involving tariff reductions and wider market access. That framework provided for an 18% reciprocal tariff on Indian goods covered by the arrangement.
India is now seeking terms that account for changes in US tariff policy and the treatment of competing exporters. The objective is to avoid a situation in which Indian products face higher import costs than similar goods manufactured elsewhere in Asia.
However, a willingness to discuss more favorable terms does not establish that a lower rate has been agreed. The final tariff schedule, product coverage and implementation conditions remain important unresolved details.
Why India Wants a Tariff Advantage Over Asian Peers
Tariffs influence the cost of importing goods into the United States. When import duties differ between competing countries, US buyers may find products from one supplier more attractive than those from another, particularly when prices and product quality are similar.
India competes with several Asian economies in manufacturing and export markets. Vietnam and Bangladesh are important competitors in garments and textiles, while Thailand and Indonesia also compete across manufacturing categories.
For example, if two suppliers offer comparable garments at similar prices but one faces a lower US import duty, the tariff difference can influence the buyer’s final cost. The advantage may affect order allocation, supplier negotiations and manufacturers’ profit margins.
India therefore wants the agreement to deliver more than a headline tariff reduction. New Delhi is also seeking preferential market access, product-specific exemptions and greater predictability in US trade policy.
A favorable arrangement could make India a more attractive sourcing destination for US companies looking to diversify supply chains. But tariffs are only one factor in sourcing decisions: manufacturing capacity, delivery times, product quality, infrastructure and regulatory compliance also matter.
How US Tariff Policy Has Changed
The current negotiations follow a series of changes in US trade policy that have complicated the original tariff framework.
In August 2025, the overall tariff burden on many Indian goods rose to as much as 50%, comprising a 25% reciprocal tariff and an additional 25% punitive duty linked to India’s purchases of Russian oil. The February 2026 framework subsequently outlined an 18% reciprocal tariff rate for covered Indian goods.
The US tariff landscape changed again in February 2026 after the Supreme Court invalidated the administration’s use of emergency powers to impose sweeping reciprocal tariffs. The administration subsequently introduced a 10% baseline import tariff, changing the calculations behind the earlier framework.
Additional measures introduced in 2026 have also affected the comparison between India and other Asian exporters. The resulting tariff structure means that a single headline rate may not fully reflect the duties applicable to every product or shipment.
| Development | Significance for India |
|---|---|
| August 2025 tariff escalation | Many Indian goods faced a combined tariff burden of up to 50% |
| February 2026 framework | Outlined an 18% reciprocal tariff rate for covered Indian goods |
| February 2026 US policy change | The Supreme Court ruling and subsequent baseline tariff altered the policy landscape |
| Additional 2026 tariff measures | Created further differences by country and product |
| Current negotiations | India is seeking a competitive and more predictable tariff framework |
The applicable duty will depend on the final agreement, product classification, exemptions and other measures in force. The rates in this timeline should not be interpreted as a single universal tariff applying to all Indian exports.
Which Indian Industries Could Benefit?
A more favorable tariff arrangement could be especially important for industries that compete heavily on price and operate with relatively tight margins.
Textiles and apparel
Indian textile and garment exporters compete with suppliers from Bangladesh and Vietnam for US retail and sourcing contracts. A lower relative tariff could help Indian companies offer more competitive landed prices or protect their margins.
Leather and footwear
Leather products and footwear are also exposed to international price competition. Preferential tariff treatment could improve the position of Indian manufacturers seeking contracts from US brands and retailers.
Other manufactured goods
The benefits could extend to other product categories included in the final agreement. The extent of the opportunity will depend on which products receive preferential treatment and whether the arrangement offers a meaningful advantage over competing suppliers.
Nevertheless, lower tariffs alone cannot guarantee export growth. Indian businesses would still need to meet delivery schedules, quality standards, sourcing requirements and the commercial expectations of US buyers.
India–US Trade Talks Near a Critical Stage
Indian Commerce and Industry Minister Piyush Goyal said on October 15 that the first phase of the trade agreement was in the final stages of legal drafting. He also emphasized that India wanted a competitive advantage over peer economies before operationalizing the arrangement.
The first tranche is distinct from the broader Bilateral Trade Agreement negotiations, which cover a wider range of trade issues. The February framework outlined the direction of the interim arrangement, while the current discussions are focused on finalizing its terms.
India’s commercial relationship with the US gives the negotiations considerable economic importance. According to Reuters, Indian goods exports to the US reached $42.79 billion between April and August 2026, compared with $40.39 billion in the same period a year earlier. India recorded a trade surplus of nearly $34 billion with the US in fiscal year 2025–26.
These figures highlight the importance of tariff certainty for exporters and manufacturers. However, no final signing date or definitive revised tariff schedule has been established in the available reporting.
The Bigger Picture
The negotiations reflect a broader competition among Asian manufacturing economies to secure access to the US market. Preferential tariff arrangements can influence where companies source goods, how exporters price products and where manufacturers choose to expand capacity. India’s push for a competitive tariff structure is therefore closely connected to its ambitions to expand manufacturing and strengthen its role in global supply chains.
For businesses, the most important outcome will be the final agreement’s practical terms rather than preliminary signals from negotiators. A lower headline rate, product-specific exemptions and safeguards against sudden tariff changes could improve planning and investment decisions. Until the agreement is finalized and implemented, however, exporters should avoid assuming that a new preferential tariff rate is already in force.
FAQs
1. Why might the US offer India lower tariffs than other Asian countries?
India is seeking a competitive advantage over exporters in countries such as Vietnam and Bangladesh. More favorable tariff terms could improve the pricing of Indian goods in the US market and help manufacturers compete for orders.
2. What tariff rate was outlined in the February 2026 framework?
The February framework outlined an 18% reciprocal tariff rate for Indian goods covered by the arrangement. The current negotiations may revisit the terms, but a revised rate has not been confirmed.
3. Which Indian sectors could benefit from a tariff advantage?
Textiles, apparel, leather and footwear could benefit because they compete with other Asian exporters on price. Other industries may also gain depending on the final agreement’s product coverage.
4. Has India signed the final trade agreement with the US?
The first phase was reported to be in the final stages of legal drafting as of October 15, 2026. The latest reporting indicates that negotiations are nearing completion, but the final terms and implementation details remain subject to confirmation.
5. Will lower tariffs automatically increase Indian exports?
No. Lower tariffs can improve price competitiveness, but export growth also depends on product quality, manufacturing capacity, delivery reliability, demand and regulatory compliance.
Looking Ahead
The possibility of more favorable US tariff terms gives India an opportunity to strengthen its position against competing Asian exporters. If the final agreement delivers preferential treatment in labor-intensive industries, Indian manufacturers could gain a pricing advantage and potentially attract additional orders from US buyers. The scale of any benefit will depend on the specific rates, exemptions and conditions negotiated by both governments.
The next milestone is the completion and publication of the agreement’s final terms. Exporters should monitor the official tariff schedule and product-level provisions before adjusting prices or making investment decisions based on anticipated concessions. Until then, the prospect of lower tariffs remains a negotiating possibility rather than a confirmed policy change.
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