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Trump had announced his intention to remove India from the Generalized System of Preferences (GSP) program in early March.
"I have determined that India has not assured the United States that India will provide equitable and reasonable access to its markets," Trump said in a statement on Friday.
India is the biggest beneficiary of the GSP, which allows preferential duty-free imports of up to $5.6 billion from the South Asian nation.
Indian officials have raised the prospect of higher import duties on more than 20 US goods if Trump drops India from the program.
Twenty-four members of the US Congress sent the administration a letter on May 3 urging it not to terminate India's access to the GSP.