India and the United States have finalised an interim trade framework that sharply reduces tariff pressure on Indian exporters and restores competitiveness in the American market.
A broad range of Indian goods that previously faced effective duties nearing 50 percent will now attract a significantly lower 18 percent tariff. The earlier burden stemmed from a combination of reciprocal tariff hikes and an additional surcharge linked to geopolitical trade measures. With the surcharge withdrawn and the reciprocal rate reset, Indian exports regain a more level playing field in one of the world’s largest consumer markets.
The new 18 percent tariff applies across several labour-intensive and high-volume export categories, including textiles and apparel, leather and footwear, plastic and rubber products, organic chemicals, home décor, artisanal goods, and select machinery. These industries rely heavily on US demand and are expected to see renewed order flows as pricing competitiveness improves.
One of the most significant gains under the interim pact is duty-free access for generic pharmaceuticals once implementation is completed. India is a leading global supplier of affordable generic medicines and already provides a substantial share of prescriptions in the US. Zero tariffs strengthen this cost advantage while benefiting both large pharmaceutical exporters and smaller manufacturers.
Additional duty-free relief extends to gems and diamonds—critical to employment-heavy clusters in Gujarat and Maharashtra—and to aircraft parts, supporting India’s emerging aerospace manufacturing and maintenance ecosystem. These measures align with broader ambitions to position India as a global manufacturing and export hub.
However, some sectors remain outside the current tariff relief. Products covered by earlier US national-security-linked tariffs, including certain steel, aluminium, and copper categories, are expected to be addressed separately during negotiations for a comprehensive Bilateral Trade Agreement.
For Indian exporters, the tariff correction represents immediate breathing room after a challenging year. Price-sensitive manufacturing centres such as Tiruppur, Panipat, Agra, Kanpur, Moradabad, Jaipur, and Surat are likely to experience early gains as US buyers return.
Overall, the interim pact removes a major barrier to trade while reinforcing India’s strengths in pharmaceuticals, gems, and advanced manufacturing—setting the stage for deeper economic integration under a future full-scale India–US trade agreement.
