India–US trade deal: Decoding impact of lower 18% tariffs and duty-free boost
Indian goods that were slammed with nearly 50% US tariffs last year will now face only 18%, and some key sectors even go duty-free. Here's how the interim pact changes the outlook for exporters.
India and the United States have finalised an interim trade framework that significantly eases the pressure on Indian exporters. A wide list of Indian goods that were facing effective duties close to 50% in the US will now attract only 18%.
The higher duty came into force last year, after Washington imposed an additional 25% surcharge on Indian goods. With that now withdrawn, India’s exports regain a level playing field in one of the world’s biggest markets.
This interim framework also sets the stage for a full India–US Bilateral Trade Agreement, but even on its own, it brings tangible relief to sectors that were hit the hardest.
18% TARIFF NOW APPLIES TO KEY EXPORT CATEGORIES
Indian exporters in several labour-intensive and high-volume sectors will feel the relief first.
The new 18% tariff applies to textiles and apparel, leather and footwear, plastic and rubber products, organic chemicals, home dcor and artisanal goods, and select machinery and industrial equipment.
These sectors depend heavily on the US market. With tariffs no longer at prohibitive levels, Indian products will become competitive again.
GENERIC MEDICINES NOW ENTER DUTY-FREE
One of the most consequential wins for India is the zero-tariff access for generic pharmaceuticals once the interim agreement is fully concluded.
Generics are among India’s strongest global export segments.
The US is the world’s largest pharmaceutical market, and Indian drugmakers supply up to 40% of its generics. Duty-free entry strengthens India’s cost advantage and benefits both established pharma giants and smaller manufacturers.
GEMS, DIAMONDS AND AIRCRAFT PARTS GET ZERO TARIFFS
Two more high-value export segments get a major boost.
Gems and jewellery clusters, especially in Gujarat and Maharashtra, employ millions. Zero tariffs in the US market make Indian stones more competitive against rivals such as Belgium and the UAE.
India has also rapidly built capabilities in manufacturing aerospace components. Duty-free access supports this young sector and aligns with India’s push to become a global manufacturing and MRO hub.
WHY TARIFFS WERE SO HIGH BEFORE
The earlier 50% burden was the result of two overlapping US decisions: a reciprocal tariff hike on Indian goods and an additional 25% duty linked to India’s continued purchase of Russian oil.
Together, they pushed tariff levels to the point where Indian exporters simply couldn’t compete. With the surcharge removed and the reciprocal rate lowered, the tariff is now reset to 18%.
WHAT IS NOT COVERED YET?
Some products, particularly those under earlier US national-security-linked tariffs such as steel, aluminium and certain copper items, remain unaffected.
These will be taken up separately during broader Bilateral Trade Agreement negotiations.
WHAT THIS DEAL MEANS FOR INDIAN EXPORTERS
Tariff cuts alone do not guarantee immediate export growth, but they remove the biggest obstacle exporters have faced since last year.
Clusters in Tiruppur, Panipat, Agra, Kanpur, Moradabad, Jaipur and Surat are expected to feel the impact first. These sectors are deeply price-sensitive. Even a small shift in duty changes order flows.
The drop in tariff rates from 50% to 18% will see a lot of US buyers return to India again.
To sum up, the interim deal gives Indian exporters breathing room after a turbulent year. The 18% tariff correction removes a major barrier, while duty-free access for generics, gems, diamonds, and aircraft parts strengthens industries where India is already globally competitive.