The US and India are close to finalizing a deal to lower tariffs on Indian exports from 50% to 15–16%. India is also considering gradually reducing its imports of Russian oil and allowing some genetically modified corn and soymeal into the country. Currently, the USD/INR exchange rate is at 88.90, showing a minor drop of 0.09%. Tariffs are customs duties on imports that help local businesses compete and are often used with trade barriers.

Taxes and Tariffs

Tariffs and taxes are different. Tariffs are paid when goods enter a country, affecting importers, while taxes are paid at the point of sale. Economists have mixed opinions on tariffs. Some believe they help local industries, while others caution that they can lead to higher prices and trade wars over time. Donald Trump intends to use tariffs during his presidential campaign to strengthen the US economy. In 2024, US imports from Mexico, China, and Canada accounted for 42%, with Mexico leading at $466.6 billion, according to the US Census Bureau. Trump plans to impose tariffs on these countries and use the generated revenue to lower personal income taxes. This trade deal is important for the Indian Rupee. The USD/INR exchange rate has already fallen to 88.90, and a confirmed agreement could strengthen the Rupee even further this year. Traders might benefit from a rising Rupee since the current tariffs have heavily impacted the currency’s value. This news is also positive for Indian stocks, especially for sectors focused on exports like technology and manufacturing. The Nifty 50 index has increased by over 4% in October 2025, partly due to talks of this deal. It has reached levels not seen since the market fluctuations after last year’s US election. Lower implied volatility in Indian stock indices could make buying call options an appealing strategy.

Commodity Market Implications

India’s potential reductions in Russian oil imports, combined with the acceptance of US agricultural products, could impact commodity traders. Reducing reliance on Russian oil might boost Indian demand for Brent crude, offering new support for global oil prices that have been around $95 per barrel. Opening the Indian market to US GMO corn and soymeal could also influence agricultural futures. This development must be understood in light of the tariff discussions during the 2024 US presidential election. While the previous focus was on broad tariffs, this deal with India shows a more strategic and less confrontational approach than expected. Reflecting on the market turmoil from the tariff disputes in 2018-2019, this change in policy represents a significant reduction in trade risks. In the coming weeks, we will closely watch for any official confirmation of this agreement. Since the deal isn’t finalized yet, uncertainty remains, providing chances for strategies that profit from volatility, such as straddles on the USD/INR pair. The Reserve Bank of India’s latest monetary policy statement on October 9, 2025, emphasized managing volatility, so we should also monitor central bank responses if the Rupee changes rapidly. Create your live VT Markets account and start trading now.

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