By:- Mr. Nachiketa Sawrikar, Fund Manager, Artha Bharat Global Multiplier Fund

The India–US relationship, which many expected to strengthen during President Trump’s second term, reached a notable low point in June. For the global economy, strained ties between the world’s two largest democracies were far from encouraging. Against this backdrop, the new India–US trade agreement—reducing the average tariff rate to around 18% from the earlier punitive level of nearly 50%—marks a meaningful reset in bilateral economic relations.

For India, lower tariffs significantly enhance access to the US market for labour-intensive exports such as textiles, engineering goods and pharmaceuticals, supporting employment, manufacturing scale and export competitiveness. The revised tariff level places India broadly in line with ASEAN peers and represents the most favourable outcome realistically achievable under current global trade dynamics. For the US, the agreement opens avenues to expand exports of energy, agricultural products and advanced technologies, while reinforcing supply-chain diversification away from over-concentrated geographies.

Beyond tariffs, the deal signals a renewal of strategic trust. Trade policy is now better aligned with shared priorities including resilient supply chains, clean-energy collaboration, and technology partnerships in areas such as semiconductors and defence manufacturing. Indian consumers also stand to benefit as high-value US and EU products become more affordable, supporting domestic demand and purchasing power.

With the rupee having weakened by nearly 5% over the past six months, improved trade flows and renewed foreign investor interest could aid a partial currency recovery. As India’s relative attractiveness improves versus ASEAN markets, a reversal of recent FII outflows could further strengthen Indian equity markets. Overall, the agreement represents a balanced, win-win outcome for both economies.