India has benefited from changes to US tariffs, including the removal of elevated IEEPA surcharges. This further lowers India’s effective tariff burden after earlier reductions.
The change comes as India and the US continue talks on an interim trade deal. A joint statement earlier this month announced an interim deal, but detailed terms are still under negotiation.
US India Tariff Relief
President Trump had already reduced the 50% tariff on India to 18%. The removal of IEEPA surcharges adds more tariff relief beyond that cut.
A Supreme Court ruling is linked to the removal of the IEEPA tariff threat. With IEEPA no longer in play, India has more scope to revisit parts of the interim agreement during negotiations.
The shift also reduces pressure on sectors that had faced possible punitive IEEPA treatment. Trade discussions between India and the US are ongoing.
Looking back at the events around 2025, the removal of IEEPA tariffs marked a significant turning point in the US-India trade relationship. That de-escalation set the stage for the stability we are seeing today, reducing the kind of headline risk that previously whipsawed markets. This foundation of cooperation has directly contributed to the sustained growth in bilateral trade, which government reports now project will surpass $250 billion this year.
Implications For Markets And Traders
For derivative traders, this means we should expect continued low implied volatility on issues related to US trade policy. The India VIX has been trading in a calm 12-14 range for months, a stark contrast to the spikes above 20 we saw during the height of trade negotiations years ago. Therefore, strategies that benefit from stability, such as selling out-of-the-money options on the Nifty 50 index, are more attractive now than buying protection against tariff shocks.
Sectors that were once vulnerable, like steel and auto components, have become consistent performers thanks to the normalized trade environment. The Nifty Auto index’s 8% gain year-to-date reflects this confidence, which we see as an opportunity for bullish strategies with defined risk, like bull call spreads. The threat of sudden punitive action is the lowest it has been in nearly a decade, reducing the likelihood of sharp, unexpected downturns in these specific industries.
This stability has also anchored the USD/INR currency pair, which has been less erratic than in previous years. The Reserve Bank of India’s latest bulletin noted the rupee’s decreased volatility against the dollar, a direct result of more predictable trade flows. We believe this makes range-bound strategies on the currency, such as short iron condors, a viable approach for the coming weeks.
However, we must remain aware of the upcoming preliminary talks for the new Comprehensive Strategic Economic Partnership, scheduled for next month. While the backdrop is positive, any unexpected friction could reintroduce uncertainty into the market. Buying cheap, long-dated Nifty 50 puts could serve as an effective, low-cost hedge against any surprising disagreements that may arise during these negotiations.
