US Tariff Reset May Cut India’s Effective Trade Burden to Low Teens - BofA

Indian exporters could see a sharper-than-headline easing in trade pressure from the US, with effective tariffs on India potentially falling to about 12–13% from roughly 30–35% earlier, according to BofA Securities.

While the announced reciprocal tariff rate has been set at 18%, BofA Securities said the actual burden would be lower once product-level exemptions and the continued application of Section 232 duties on steel, aluminium and automobiles are factored in. On that basis, the firm estimates India’s effective tariff rate at closer to the low-teens, even without fully accounting for the cushioning effect of recent rupee weakness .

Such a shift would provide meaningful relief to India’s export sector, particularly labour-intensive segments such as gems and jewellery, textiles, agricultural products and engineering goods, the report said. The rollback of penalties imposed since August 2025, including those linked to Russian crude purchases, also improves India’s competitiveness relative to regional peers . 

The tariff easing could have broader macro implications. BofA Securities flagged upside risks to its FY27 GDP growth forecast of 6.8%, citing resilience in high-frequency indicators and the likelihood that exports and investment sentiment improve following the trade breakthrough. The firm said it would review its growth projections in detail before making any revisions, but expects momentum to strengthen from here. 

On monetary policy, the deal reduces a key source of uncertainty for the outlook, leading BofA to drop its call for a near-term rate cut and instead expect the Reserve Bank of India to focus on liquidity support to ensure transmission. The brokerage said it now sees the rate-cutting cycle as largely complete, with growth conditions stabilising as trade risks recede .

Overall, while headline tariffs remain in place on select products, the effective reduction marks a significant reset for India’s export and growth prospects, pending clarity on implementation and timelines.