18% tariff, wider US market access: How India gains from interim trade pact with US

India and the US have finally shaken hands on a trade framework, opening the doors for a broader US-India Bilateral Trade Agreement (BTA) down the line.

But even on its own, this interim pact brings long-awaited relief for India’s exporters and gives several industries exactly the kind of support they have been asking for.

It cuts US tariffs, clears decades-old market barriers, opens new lanes for Indian goods, and, importantly, pulls the two economies closer at a time when global supply chains are being redesigned.

The benefits for India stand out immediately once you read the details. Union Commerce and Industry Minister Piyush Goyal called the pact a “landmark framework” that opens a USD 30 trillion market for Indian exporters and creates lakhs of new jobs, especially for MSMEs, farmers and youth.

In this article, we take you through the key gains for India and what they could mean for exporters, manufacturers, and the broader economy.

TARIFF REDUCED FROM 50% TO 18%

The most immediate gain comes from the United States lowering its reciprocal tariff on Indian exports to 18%. Until now, many categories of Indian goods were hit with a punishing 50% duty, a tariff wall that priced out thousands of Indian businesses.

The drop to 18% is a pretty dramatic correction. It instantly boosts Indian exporters in textiles, apparel, leather, footwear, plastics, organic chemicals, home decor, and artisanal goods.

Goyal said that this single shift gives Indian suppliers a “huge market opportunity” in the world’s largest consumer economy.

These are sectors that rely heavily on access to the American consumer and support millions of jobs back home. The moment the new tariff applies, Indian products become more competitive in one of the world’s largest markets.

TARIFF-FREE ACCESS FOR INDIA’S STRONGEST EXPORT SECTORS

Once the interim agreement is fully concluded, the US will go a step further and remove tariffs entirely on some of India’s strongest export engines. Generic pharmaceuticals, gems and diamonds, and aircraft parts will all enter the US market duty-free.

These are sectors that already give India global leverage. Generics dominate the world’s medicine supply. Gems and diamonds power clusters of small and medium enterprises in Gujarat and Maharashtra.

According to Goyal, tariff-free access for generics, gems and diamonds will “further enhance India’s export competitiveness and Make in India”.

BOOST FOR MANUFACTURING AMBITIONS

India will eliminate or reduce tariffs on all US industrial goods and a wide basket of US agricultural items. These concessions might look large on paper, but they align with India’s own needs.

To build out its manufacturing base, India requires advanced machinery, aviation-grade components, medical technology, energy systems, and semiconductor-adjacent hardware. Reducing tariffs makes these critical inputs cheaper, faster to import, and easier to integrate into domestic production.

The deal also forces long-delayed regulatory fixes. India has committed to addressing bottlenecks affecting US medical devices, Information and Communication Technology (ICT) goods and food and farm products.

Within six months of the agreement taking effect, India must decide whether to accept American or international standards in key sectors. This brings more predictability into the system and clears long-standing irritants for global companies.

NEW PUSH FOR TECH, AI HARDWARE AND SUPPLY CHAINS

The agreement strengthens cooperation on high-end technology, particularly hardware essential for artificial intelligence and cloud infrastructure. Both countries will increase trade in graphic processing units, or GPUs, and expand joint work on semiconductors and export-control coordination.

This is geopolitically significant. It signals that India is being positioned as a preferred partner in global tech supply chains at a time when major economies are diversifying away from concentrated production hubs.

CLEARER RULES, FASTER APPROVALS FOR BUSINESSES

Beyond tariffs, the deal focuses heavily on reducing the friction of doing business. India and the US will coordinate on testing standards, certification processes, and conformity assessments across mutually identified sectors.

For companies on both sides, this means fewer repeat tests, fewer regulatory surprises, and faster turnaround times. Predictability is not as flashy as tariff cuts, but it is often the difference between a deal happening or falling through. This part of the agreement could quietly be one of the most valuable for exporters.

FARMERS AND DAIRY SECTORS STAY FULLY PROTECTED

India has kept its most politically sensitive agricultural products outside the tariff-cut list. Staples such as wheat, rice, maize, dairy, poultry and several vegetables remain fully protected.

Goyal highlighted that the agreement “completely protects sensitive agricultural and dairy products”, ensuring rural livelihoods are not affected.

This protects rural livelihoods and avoids sudden shocks to domestic markets. India manages to expand access to a major overseas market while safeguarding the sectors that support millions of farmers.

WHAT HAPPENS NEXT?

The interim trade framework is a foundation for the full US–India Bilateral Trade Agreement, which both sides intend to negotiate quickly. That larger pact will likely include deeper digital trade rules, clearer standards, and stronger supply-chain coordination.

For now, the gains are already substantial. Lower US tariffs on major exports. Zero tariffs on high-value sectors. A more predictable regulatory ecosystem. Stronger tech cooperation. And a position in global supply chains that India has long aimed for.

As Goyal put it, this agreement helps India and the US “deepen economic cooperation and support sustainable growth for our people and businesses”.