US–India Trade Deal Levels the Field for India’s Core Export Industries

The recently announced India–US trade deal marks an important inflection point for India’s export landscape. With tariffs on a majority of Indian goods to the US reduced to 18% from earlier levels as high as 50%, the agreement significantly improves India’s pricing competitiveness in one of its most critical export markets.

Given that the United States accounts for nearly 20% of India’s total exports, amounting to USD 86.5 billion in FY25, the rollback of elevated tariffs is more than a sentiment trigger—it has tangible implications for export volumes, margins, and sectoral earnings visibility.

Why the US Tariff Reset Matters for India?

From some time, Indian exporters were operating under one of the highest tariff regimes imposed by the US globally, putting them at a relative cost disadvantage. The reduction to an 18% tariff restores pricing parity with global peers, easing pressure on margins and improving competitiveness across key categories.

This reset comes at a time when:

• Global trade is gradually stabilising
• Supply chains are diversifying away from concentration risk
• Buyers are prioritising reliability and cost efficiency

In this context, the tariff rollback acts as a demand unlock, rather than merely a policy adjustment.

Key Export Sectors That Stand to Benefit

Several of India’s core export industries derive a meaningful portion of their demand from the US, making them direct beneficiaries of the deal.

High-Exposure Beneficiaries (15–40% US Dependence)

• Engineering Goods
• Textiles
• Gems & Jewellery
• Chemicals
• Marine Products

These sectors were previously absorbing elevated tariff costs, which constrained margins and limited market share expansion. The normalization of tariffs:

• Improves export realizations
• Enhances margin visibility
• Supports better capacity utilisation

Over time, this could enable Indian exporters to recapture lost market share in the US.

Impact on Tariff-Insulated Sectors

Sectors such as electronics and pharmaceuticals, which were relatively insulated from direct tariff hikes, still stand to benefit indirectly.

While these categories were not severely impacted on costs, policy uncertainty had led to demand hesitation among US importers. With trade clarity returning:

• Importer confidence is likely to improve
• Order flows could stabilise and expand
• Medium-term demand visibility strengthens

The benefit here is less about cost and more about certainty and continuity.

Strategic Tailwind Alongside Europe FTAs

The US tariff reset comes close on the heels of India’s expanding FTA momentum with Europe, strengthening India’s export positioning across two of its largest global markets.

Together, these developments support:

• Export growth sustainability
• Manufacturing utilisation
• Medium-term economic momentum

Rather than a short-lived boost, this creates a structural support layer for India’s export ecosystem.

Market Perspective: What Investors Should Track?

While the trade deal is clearly positive, investors should focus on:

• Order book growth in export-heavy sectors
• Margin expansion trends
• Capacity utilisation improvements
• Earnings visibility over the next few quarters

The real impact will play out gradually, as exporters convert improved competitiveness into actual volumes.

Bottom Line

The India–US trade deal meaningfully levels the playing field for Indian exporters, especially in tariff-sensitive sectors. By reducing punitive tariffs to 18%, the agreement enhances competitiveness, improves margin prospects, and strengthens India’s position in a key global market.

While not a one-shot growth trigger, it provides durable support to exports, manufacturing, and sectoral earnings—making it a constructive development for India’s medium-term economic and market outlook.