February 2026 brought significant changes to India's tariff situation. The reciprocal rate was reduced from 25% to 18% under an interim trade agreement, and the Russian oil tariff was terminated. For importers of Indian goods — especially pharmaceuticals, textiles, gems, and jewelry — these changes create new opportunities. Here's what you need to know.
What Changed in February 2026
Two major changes took effect: On February 7, 2026, the Russian oil tariff (25% on petroleum products) was terminated. Separately, the US-India interim trade agreement reduced India's reciprocal tariff rate from 25% to 18% — a 7 percentage point reduction. Additionally, some designated products now qualify for 0% reciprocal duties under the agreement, though the full list of qualifying products is still being finalized. These changes represent the first concrete results of ongoing US-India trade negotiations.
Impact on Key Import Categories
Pharmaceuticals: India is the world's largest supplier of generic drugs to the US. The reduction from 25% to 18% provides meaningful relief for pharmaceutical importers and could moderate drug price increases. Textiles and apparel: Indian garments become more competitive at 18% compared to Bangladesh (37%), Vietnam (46%), and Cambodia (49%). This could accelerate a shift in sourcing. Gems and jewelry: India is a major diamond cutting and jewelry manufacturing hub. The reduced rate improves competitiveness against competitors. Agricultural products: Indian spices, tea, and food products benefit from the lower rate.
Comparison with Competing Countries
India's new 18% rate makes it significantly more competitive than many Asian rivals. India (18%) vs. China (20%+ with Section 301): India is now cheaper for most products not subject to Section 301. India (18%) vs. Bangladesh (37%): India is 19 points cheaper — huge for textiles. India (18%) vs. Vietnam (46%): India saves 28 percentage points. India (18%) vs. Indonesia (32%): India saves 14 points. India (18%) vs. Thailand (36%): India saves 18 points. Only the 10% tier countries (UK, Japan, Singapore) and USMCA Mexico (0%) offer better rates.
Products Qualifying for 0% Duties
The interim agreement includes a provision for designated products to qualify for 0% reciprocal duties. While the complete list is still being finalized, early indications suggest certain pharmaceutical ingredients, medical devices, and agricultural commodities may qualify. Importers should work with their customs brokers to identify whether their specific products are included as the designations are published. This 0% rate applies only to the reciprocal tariff — MFN base rates and any applicable Section 232 tariffs still apply.
Future Outlook: Full Trade Deal
The February 2026 changes are part of an interim agreement. Full US-India trade deal negotiations are ongoing, with the potential for further tariff reductions. Key issues under negotiation include: India's market access barriers for US agricultural products, intellectual property protections (especially for pharmaceuticals), digital trade rules, and defense procurement. A comprehensive deal could lower rates further or expand the list of 0% duty products. However, negotiations are complex and a full agreement is likely months away.
Key Takeaway
India's tariff rate dropped from 25% to 18% in February 2026, making it one of the most competitive sourcing options in Asia. For textiles, pharmaceuticals, and gems, India now undercuts Bangladesh by 19 points and Vietnam by 28 points. Watch for further reductions as full trade deal negotiations continue.
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