Financial markets in India surged on Tuesday following a significant diplomatic breakthrough between Washington and New Delhi, with President Donald Trump announcing a substantial reduction in reciprocal tariffs on Indian goods. The unexpected trade agreement, revealed through Trump’s Truth Social platform on Monday, immediately triggered robust investor confidence across Indian markets.
The Indian rupee demonstrated remarkable strength, appreciating by over one percent to reach 90.40 against the US dollar during early trading sessions. Simultaneously, equity markets experienced substantial gains as investors responded positively to the prospect of improved trade relations between the world’s two largest democracies.
This development marks a dramatic reversal from August, when bilateral relations deteriorated after Trump escalated import duties on Indian products from 25 percent to 50 percent. The previous tariff hike was implemented amid allegations that India’s purchase of discounted Russian oil was indirectly supporting Moscow’s military operations in Ukraine.
The newly announced agreement reduces reciprocal tariffs to 18 percent, a move Trump attributed to his “friendship and respect” for Indian Prime Minister Narendra Modi. In his social media statement, the US president characterized Modi as “a great friend and respected leader,” noting that their discussions encompassed both trade matters and collaborative efforts to resolve the ongoing Russia-Ukraine conflict.
Prime Modi expressed enthusiastic approval of the agreement, describing it as a “wonderful announcement” that would benefit India’s 1.4 billion citizens. He emphasized that enhanced cooperation between major economies creates substantial opportunities for mutually advantageous partnerships while delivering tangible benefits to both populations.
The tariff reduction comes amid India’s strategic diversification of trade relationships, including last month’s comprehensive trade agreement with the European Union and recent efforts to normalize economic ties with China.