India–US Trade Agreement Resets Tariff Regime, Revives Exports and Strengthens Economic Momentum

India and the United States have concluded a major trade agreement that sharply reduces US import duties on a wide range of Indian exports, marking one of the most significant resets in bilateral trade relations in recent years. The deal rolls back punitive tariffs that had reached as high as 50 percent, restoring competitiveness for Indian exporters and providing relief to labour-intensive industries that form the backbone of India’s manufacturing and export economy.

The agreement comes after months of trade tensions that had disrupted supply chains, pressured exporter margins, and created uncertainty for businesses dependent on the US market. With the revised framework, US tariffs on most Indian goods will be reduced to 18 percent, while select export categories are expected to move toward zero-duty or phased-down access over time.

India-US trade deal: India may get zero duty exports to the US after the trade deal for goods worth about $10 billion, which America allows to almost all of its FTA partners. (PTI File Photo) | Hindustan Times

Relief for Labour-Intensive Sectors and Export Clusters

The tariff reduction is expected to provide immediate relief to labour-intensive industries such as textiles, garments, leather goods, footwear, carpets, handicrafts, gems and jewellery, chemicals, and marine products. These sectors employ millions of workers across India and had been among the worst hit by the earlier tariff regime.

Higher duties had placed Indian exporters at a disadvantage compared to regional competitors such as Bangladesh, Vietnam, Thailand, Cambodia, and Malaysia, whose products faced lower US tariffs. With the new structure, Indian exporters are projected to regain a pricing edge of one to two percentage points, helping revive orders, improve capacity utilisation, and restore lost market share in the world’s largest consumer market.

Exporters and industry bodies have said the agreement is likely to trigger a recovery in export volumes and improve margins that had been squeezed by elevated landed costs and discounting to retain US buyers.

Marine Products, Handicrafts, and Niche Exports Set for Recovery

Marine exports, particularly shrimp, are expected to see a meaningful rebound, as the US remains one of India’s largest seafood markets. Reduced duties will improve competitiveness for Indian seafood exporters, supporting export volumes and benefiting coastal communities dependent on fisheries.

Carpets, handicrafts, and home décor, many of which are produced in small-scale and cottage industry clusters are also expected to benefit significantly. These sectors had lost ground to competitors in Turkey and Southeast Asia due to higher tariff burdens. The tariff reset is expected to help Indian producers regain shelf space with US retailers and improve long-term order visibility. 

Protection of Agriculture and Dairy Maintains Domestic Balance

While the agreement opens doors for export-oriented industries, India has ensured that its most sensitive agriculture and dairy sectors remain protected. Products such as dairy, cereals, wheat, rice, maize, meat, poultry, and genetically modified foods have been excluded from tariff liberalisation.

This approach reflects the government’s strategy of balancing export growth with domestic priorities, particularly farmer livelihoods and food security. Moderately sensitive items, including certain fruits and nuts, may see gradual tariff adjustments through quotas or phased reductions, allowing for controlled market opening without sudden disruption.

Strategic Reset After Sanctions-Linked Trade Tensions

The trade pact represents a strategic reset after a period of heightened tensions linked to additional US duties imposed over India’s purchase of Russian oil. As part of the broader understanding, the US is withdrawing punitive surcharges, while India has committed to reducing trade barriers on selected American goods and expanding purchases of US energy, aircraft, and technology products over time.

Market analysts say the agreement also carries geopolitical significance, reinforcing economic ties between the two countries at a time of global supply chain realignment and increasing strategic competition. The deal is expected to support stronger bilateral cooperation in manufacturing, technology, and critical supply chains.

Markets, Currency, and Investor Sentiment Respond Positively

Financial markets reacted strongly to the announcement. Indian equity indices surged, the rupee strengthened by over one percent against the US dollar, and government bond yields eased as investors priced in improved export prospects and reduced external pressures.

The Reserve Bank of India has noted that recent trade agreements, including the US deal, are likely to support merchandise exports and help sustain India’s economic growth momentum amid global uncertainty. Economists see the tariff rollback as supportive of capital inflows, export earnings, and broader business confidence.

State-Level Gains and Regional Export Hubs to Benefit

Several states with strong export bases are expected to see tangible benefits. Odisha, for example, has highlighted potential gains for its marine, handloom, and mining sectors. Export hubs in Tamil Nadu, Gujarat, Maharashtra, Uttar Pradesh, and West Bengal are also expected to see renewed activity across apparel, leather, engineering goods, seafood, and home textiles.

Industry representatives say improved competitiveness in the US market could translate into higher production, new hiring, and increased investment in export-oriented manufacturing clusters.

The MGMM Outlook

The India–US trade agreement marks a significant reset in bilateral trade relations by rolling back steep US tariffs that had eroded the competitiveness of Indian exporters. By reducing duties to more manageable levels and creating pathways for phased zero-duty access in select categories, the deal restores pricing power for Indian goods in the US market. This directly strengthens labour-intensive sectors such as textiles, garments, leather, gems and jewellery, chemicals, and marine products, helping revive export orders, improve margins, and rebuild market share that had shifted to competing Asian economies.

At the same time, the agreement reflects a calibrated strategy that promotes export growth while safeguarding sensitive domestic sectors. By keeping agriculture and dairy protected, India has preserved farmer livelihoods and food security, while still unlocking gains for manufacturing and niche export clusters. The broader strategic reset also signals deeper economic alignment between India and the US, supporting supply chain diversification, investor confidence, and regional export hubs. Together, these shifts position Indian exporters to benefit from global realignments and sustain momentum in external trade and industrial activity.

(Sources: Hindustan Times, The HinduBusinessLine, LiveMint)