By Deepak Parvatiyar*
A Phone Call, a Tariff Cut and No Paper Trail
From 50% to 18%: Relief Wrapped in Uncertainty
New Delhi: When Prime Minister Narendra Modi and U.S. President Donald Trump spoke by phone on February 3, 2026, the exchange was immediately projected as a turning point in strained India–U.S. trade relations. Within hours, Trump announced that Washington would reduce tariffs on Indian goods to about 18 per cent, rolling back the punitive duties imposed through much of 2025. Modi, in a cautiously worded message, welcomed the move as a boost for Indian exporters and a reaffirmation of the bilateral partnership. What has followed, however, is less a clear settlement than a widening gap between political declaration and documented policy.
Trump described the call in expansive terms, calling Modi a “great friend” and asserting that India had agreed to curb its purchases of Russian oil and open its markets widely to U.S. products. He framed the tariff rollback as part of a broad bargain covering energy, agriculture and industrial goods. Modi’s response was notably restrained. He spoke of improved access for “Made in India” products and closer cooperation, but did not endorse Trump’s claims about oil imports or sweeping market concessions. Two leaders appeared to be narrating the same conversation through different strategic lenses.
The rollback reversed one of the sharpest escalations in India–U.S. economic ties in recent years. Before the disputes of 2025, Indian exports entered the U.S. largely under modest Most Favoured Nation duties. Textiles and apparel typically faced tariffs of about 3 to 12 per cent, engineering goods and auto components around 1 to 3 per cent, gems and jewellery roughly 2 per cent, and leather and footwear about 7 to 8 per cent. Pharmaceuticals and many electronics products were effectively duty-free. These levels allowed Indian exporters to compete with suppliers from Southeast Asia and Latin America without severe price distortion.
That balance collapsed in mid-2025 when Washington imposed reciprocal tariffs of around 25 per cent, followed by additional punitive duties tied to policy and geopolitical disputes, including India’s continued purchase of Russian oil. By late 2025, effective tariffs on many labour-intensive and manufacturing sectors approached or exceeded 50 per cent once anti-dumping and related charges were added. Textiles, gems and jewellery, leather products, marine exports, auto components and engineering goods were among the hardest hit. Orders slowed, contracts were suspended, and exporters warned that market share was drifting toward Vietnam, Bangladesh and Mexico.
The February rollback to about 18 per cent has therefore been welcomed as relief, but it is relief measured against an extreme benchmark. For most sectors, current tariffs remain higher than the pre-2025 norm. Indian exporters are better off than they were under punitive duties, but they have not returned to the relatively open conditions that once prevailed. Pharmaceuticals and certain electronics remain exceptions, having been largely spared even during the tariff war.
What remains unclear is the legal and procedural status of the decision. No joint statement has been issued, no formal text released, and no detailed tariff schedule published to show which product lines are covered and which remain excluded. It is not known whether the rollback represents a permanent policy change, a temporary waiver or an executive decision that could be reversed with little notice. The absence of immediate notification from U.S. trade authorities and the lack of parliamentary disclosure in India have left analysts unsure whether this is a binding agreement or a political understanding awaiting paperwork.
Another unresolved issue concerns India’s retaliatory tariffs imposed in 2025 on selected U.S. products. There has been no official confirmation that New Delhi will withdraw them. Without parallel action, the claim of a full trade reset appears incomplete. The silence suggests that negotiations may still be in progress, or that the rollback is being treated as a unilateral concession rather than a comprehensive settlement.
Markets reacted with caution. Export-oriented stocks saw brief optimism and industry bodies welcomed the easing of pressure, but there was no sustained surge in broader indices or currency movement. Businesses, particularly in textiles and engineering goods, remain hesitant to commit to long-term contracts without clarity on whether the tariff environment has truly stabilised.
Geopolitics shadows the episode. Trump’s assertion that India would curb Russian oil purchases implies that trade policy is being used as leverage over foreign policy alignment, particularly in relation to the Ukraine conflict. New Delhi’s refusal to echo that claim publicly suggests discomfort with framing a commercial decision as a strategic concession. The ambiguity has reinforced the sense that the tariff rollback may be conditional rather than unconditional.
Politically, the announcement has been embraced by the ruling party as evidence of Modi’s personal diplomacy and international stature. In export centres such as Tiruppur, Surat, Ludhiana and Pune, the move has been presented as a victory for manufacturers and workers. The opposition, however, has focused on what it calls the opacity of the arrangement. Questions have been raised about what commitments India may have made behind closed doors and why no formal document has been placed before Parliament. Critics argue that a decision affecting billions of dollars in trade should not rest solely on the optics of a phone call.
There is also a comparative dimension that complicates the celebratory narrative. Even at 18 per cent, Indian exports may still face higher duties than competitors benefiting from preferential arrangements or lower baseline tariffs. The rollback restores partial competitiveness but does not necessarily tilt the field decisively in India’s favour.
The episode fits a familiar pattern in Modi–Trump interactions, where high-profile announcements have often preceded detailed negotiation and, in some cases, later dilution. The memory of earlier declarations that struggled to translate into durable policy lends weight to scepticism about the permanence of this change.
What emerges is a picture of relief layered over uncertainty. The tariff cut eases immediate pressure on exporters and allows both leaders to claim success. Yet the lack of documentation, the divergence in official narratives, the unresolved question of retaliatory tariffs and the geopolitical subtext all point to a fragile arrangement. A reduction from 50 per cent to 18 per cent can be framed as a diplomatic triumph, but it still leaves Indian exporters paying more than they did before the conflict began.
In the end, the February 3 call may be remembered less for restoring trade normalcy and more for exposing how quickly trade policy can be reshaped by political theatre. It offered respite without resolution, symbolism without full transparency, and optimism tempered by the knowledge that a single announcement is not the same as a settled agreement. The true test will lie not in what was said on the phone, but in what is eventually written into law.
*Senior journalist
