Shamika Ravi, a member of the Prime Minister’s Economic Advisory Council, said the new on Tuesday India-US Trade Agreement gives Indian exporters a clear advantage, after US President Donald Trump announced that reciprocal tariffs on Indian goods will be reduced to 18% from 25% with immediate effect.

“This agreement gives India a strong competitive advantage: US tariffs on Indian goods are now 18 percent, lower than major Asian rivals (China at 34 percent, Vietnam/Bangladesh at 20 percent, Indonesia/Pakistan at 19 percent), overtaking exports of textiles, leather, automobiles, IT and manufacturing,” Ravi said.

He noted the strong market reaction to the announcement, linking investor sentiment to expectations of stronger export momentum across a number of sectors. “The market responded accordingly – Nifty 50 soared 5% at the open (hitting record highs), Sensex jumped over 3,600 points and textile/leather stocks soared up to 20%, with strong gains in IT, auto etc. #PatientDiplomacy,” Ravi said.

India’s new 18% tariff rate now places it ahead of most South Asian and Southeast Asian countries in terms of relative access to the US market. Bangladesh, Sri Lanka, Taiwan and Vietnam face 20%, while Pakistan, Indonesia, Malaysia, Thailand and the Philippines are at 19%. Cambodia is also at 19%, leaving India with a lower tariff burden than many competing export economies.

The tariff cut was announced on Monday afternoon following a telephone conversation between Prime Minister Narendra Modi and US President Trump. “Out of friendship and respect for Prime Minister Modi and at his request, effective immediately, we agreed to a trade agreement between the United States and India, whereby the United States will charge a reduced reciprocal tariff, reducing it from 25% to 18%,” the US president said on social media.

Trump also said India would act to lower its trade barriers against the US. India “will also move to reduce its tariff and non-tariff barriers against the United States to zero.” He added that Modi had pledged to significantly increase purchases of American goods, including large imports in several sectors.

The US president said Modi also pledged to “buy American” at a much higher level, in addition to more than US$500 billion in energy, technology, agricultural, coal and many other products. Trump described the agreement as another step in strengthening ties between the two countries. “Our incredible relationship with India will be even stronger in the future. Prime Minister Modi and I are two people who do things that cannot be said for most,” he said.