Springboard 2026 | How India balanced tariffs and trade deals in a defining year

India’s trade policy in 2025 unfolded against a challenging global backdrop of high US tariffs, geopolitical uncertainty and slowing global demand. Even so, the year turned out to be one of India’s most productive in terms of free trade agreements (FTAs).

Mint explains the playbook behind New Delhi's signing of two major FTAs, concluding negotiations for another, and advancing several trade talks to advanced stages.

What shaped India's trade policy in 2025?

India’s trade strategy in 2025 took shape amid heightened uncertainty after Donald Trump’s inauguration on 20 January revived protectionist sentiment in the US. In late July, Washington announced a 25% tariff on Indian imports, effective 7 August, followed by an additional 25% penalty tariff linked to India’s continued purchase of Russian oil. Together, these measures raised the tariff burden to 50% on many Indian products from 27 August.

Despite this backdrop, New Delhi moved ahead with an aggressive FTA push, signing a landmark trade agreement with the UK on 24 July 2025, followed by a Comprehensive Economic Partnership Agreement (CEPA) with Oman in December, while also concluding negotiations with New Zealand.

Signing two FTAs in a single year is a big achievement for the country, which has traditionally approached trade liberalization cautiously. The timing reflected a clear strategy to secure long-term market access even as global trade conditions deteriorated.

The UK deal improves access for Indian textiles, apparel, engineering goods, pharmaceuticals, and services, while the Oman pact strengthens India’s economic and strategic footprint in the Gulf, a region critical for energy security, remittances, and logistics.

How important is the deal with the UK?

The UK agreement is among London’s most comprehensive post-Brexit trade pacts in the Indo-Pacific and adds to India’s growing FTA portfolio alongside Australia and the United Arab Emirates. Under the deal, tariffs will be eliminated on 99% of Indian exports, providing zero-duty access to products such as textiles, footwear, carpets, cars, and marine goods that currently face tariffs ranging from 4% to 16%. In return, India will lower duties on select UK luxury products, including Scotch whisky and premium cars.

What does India gain from the Oman CEPA?

The Oman CEPA, signed on 18 December, is the country's second deep trade pact with a Gulf nation after the UAE. Oman has offered zero-duty access on over 98% of its tariff lines, covering more than 99% of India’s exports by value. India, in turn, has liberalized nearly 78% of its tariff lines while protecting sensitive sectors such as dairy, tea, coffee, rubber, and jewellery, largely using tariff-rate quotas for items of interest to Oman. Labour-intensive sectors ranging from textiles and leather to pharmaceuticals, medical devices, and automobiles are set to benefit from full tariff elimination.

How will a trade deal with New Zealand help?

FTA talks with New Zealand concluded on 22 December, opening up fresh export opportunities. India remains under-represented in several categories where it is globally competitive, and New Zealand is a major importer. In 2024-25, New Zealand imported only $711 million worth of goods from India, against total imports of about $50 billion and over $10 billion from China. The gap is particularly visible in processed foods and pharmaceuticals, pointing to significant headroom for FTA-led export growth.

“For India, the challenge now is to pair the FTA with targeted export promotion, standards cooperation, regulatory facilitation, and logistics support. For New Zealand, diversifying imports away from a single dominant supplier would strengthen supply-chain resilience," said Ajay Srivastava, founder of the Global Trade Research Initiative (GTRI). “If implemented well, the agreement could unlock substantial new trade across processed foods, pharmaceuticals, machinery, electronics, vehicles, aerospace components, and furniture."

Why is 2025 significant?

What makes 2025 stand out is that these agreements were concluded even as India faced one of its steepest tariff challenges. The US imposed tariffs of up to 50% on certain Indian exports—among the highest applied to any major American trading partner, barring Brazil. Traditionally, such shocks would have weighed heavily on trade flows.

Yet India’s trade proved more resilient than expected. Merchandize exports in 2025-26 (April-November) stood at $292.07 billion, compared with $284.60 billion a year ago, while imports rose to $515.21 billion from $487.93 billion.

“Even in a challenging global trade environment, India’s approach in 2025 shows a clear shift towards securing long-term market access through FTAs while managing short-term tariff pressures. By expanding its trade network across key regions, India is positioning its exporters to tap new demand, diversify risks and build resilience in global value chains," said Abhash Kumar, trade economist and assistant professor, economics, Delhi University.

How did India-US trade behave?

Despite the tariff hike, India-US trade showed resilience. Indian exports benefited from supply-chain diversification away from China, particularly in electronics and pharmaceuticals, while services trade provided a buffer.

Exports held up initially despite a 10% duty—rising from $8.4 billion in April to $8.8 billion in May—before weakening as tariffs rose sharply in August. Exports fell to $6.8 billion that month and dropped further to $5.5 billion in September, the first full month under the 50% tariff.

The surprise came thereafter. Even with tariffs unchanged, exports recovered to $6.3 billion in October and $6.9 billion in November, indicating that exporters had adjusted to the higher duties. Month-on-month, exports to the US rose 9.8% in November. Exports to China also increased sharply, rising 35.2% month-on-month to $2.19 billion.

What else changed on the trade front?

Beyond signed deals, India advanced negotiations with the European Union, progressed talks with the US on a tariff framework, and revived discussions with Qatar and Canada, reflecting a deliberate strategy to diversify trade partners amid global fragmentation.

What does this mean going ahead?

The experience of 2025 points to a more calibrated trade strategy—using FTAs to secure long-term market access while absorbing short-term tariff shocks through diversification and services-led growth. Execution will now be key, particularly how quickly exporters leverage the UK and Oman agreements and whether advanced talks with the US and others translate into outcomes. If implemented well, the trade groundwork laid in 2025 could shape India’s external commerce for years to come.

“India’s current trade strategy is likely to have a strongly positive impact over the long term. By steadily expanding its network of FTAs and securing market access across key regions, India is positioning itself to become a more central player in the global economy by 2047," said Amit Singh, associate professor at the Special Centre for National Security Studies, Jawaharlal Nehru University.