What Does India & US Gain and Lose out of India US Trade Deal 2026

What India Gains from the India US Trade Deal

Textile and Apparel Sector Benefits

Tariffs on textile exports drop from 50% to 18%, with silk receiving 0% duty access. This opens enhanced opportunities in a U.S. market valued at $113 billion. Major categories benefiting include readymade garments, carpets, man-made and cotton textiles, bedspreads, yarn, baby clothing, bed linen, blankets, and gloves.

Given India’s substantial textile production capacity and competitive labor costs, this tariff reduction positions Indian manufacturers to capture market share from competitors facing higher duties. The textile sector employs millions across India’s production clusters, making this particularly significant for employment generation.

Leather and Footwear Market Access

Tariff reductions from 50% to 18% provide improved access to a $42 billion U.S. leather and footwear market. India’s labor-intensive leather industry, concentrated in states like Tamil Nadu and Uttar Pradesh, stands to benefit substantially. The agreement covers finished leather, leather footwear, and footwear components.

This positions India as a preferred supplier against competitors like Vietnam and China, which face higher tariff barriers in the U.S. market.

Gems and Jewelry Sector Advantages

The agreement reduces tariffs from 50% to 18% on gems and jewelry, providing access to a $61 billion U.S. market. Additionally, 0% duty access applies to diamonds, platinum, and coins covering a $29 billion market segment.

India dominates global diamond cutting and polishing, processing approximately 90% of the world’s diamonds by volume. Zero-duty access for cut and polished diamonds, lab-grown diamonds, and colored gemstones strengthens India’s competitive position in this high-value sector.

Machinery and Industrial Exports

Machinery tariffs drop from 50% to 18%, opening opportunities in a $477 billion U.S. market. India’s current machinery exports to the U.S. stand at $2.35 billion, indicating substantial growth potential. This supports India’s manufacturing ambitions and efforts to expand value-added industrial exports.

Agricultural Export Opportunities

The United States grants zero additional duty access to $1.36 billion in Indian agricultural exports. Beneficiary products include:

Spices (India saw 88% growth in spice exports in 2024-25)
Tea and coffee extracts
Coconut and coconut oil
Tree nuts (areca, Brazil nuts, cashews, chestnuts)
Fruits (avocados, bananas, guavas, mangoes, kiwis, papayas, pineapples)
Mushrooms
Processed products (fruit pulp, juices, jams)
Bakery products
Sesame and poppy seeds

Within this, $1.035 billion receives assured zero reciprocal tariff treatment, providing stability for Indian farmers and agricultural exporters. India maintains a $1.3 billion agricultural trade surplus with the United States ($3.4 billion in exports versus $2.1 billion in imports).

Industrial Exports with Zero-Duty Access

The agreement secures zero additional duty for $38 billion in industrial exports under Section 232 provisions and other categories:

Aircraft parts
Generic drugs and pharmaceutical ingredients
Elementary auto parts
Gems and diamonds
Clocks and watches
Essential oils
Home décor items (chandeliers, illuminated signs)
Inorganic chemicals
Instruments and apparatus
Minerals and natural resources
Natural rubber

Home Décor and Consumer Goods

Tariffs on home décor exports reduce from 50% to 18%, accessing a $52 billion U.S. market. Products include wood furniture, pillows, cushions, quilts, non-electrical lamps, and furnishing products. Additionally, 0% duty access covers $13 billion in products including seats, chandeliers, and illuminated signs.

Toys and MSMEs

Toy export tariffs drop from 50% to 18%, providing access to an $18 billion U.S. market. This creates opportunities for domestic manufacturers, particularly MSMEs, to scale production and integrate into global supply chains.

What India Concedes in the Trade Deal

Industrial Goods Market Opening

India eliminates or reduces tariffs on U.S. industrial goods across multiple categories. Market access is structured through immediate elimination, phased reduction over up to ten years, and quota-based access depending on product sensitivity.

Sensitive sectors receive calibrated safeguards:

Automobiles: Liberalized through quota and duty reduction combinations
Medical devices: Long, staggered phasing schedules
Precious metals: Quota-based tariff lowering

Agricultural Product Imports

India provides market access to select U.S. agricultural products while maintaining protections for sensitive sectors:

Liberalized categories include:

Tree nuts (in-shell almonds, walnuts, pistachios under tariff rate quotas)
Fresh and processed fruits (berries)
Niche oils
Wine and spirits
Soybean oil
Dried distillers’ grains (DDGs)
Red sorghum for animal feed
Select processed foods

Phased elimination (up to 10 years) applies to:

Albumins
Certain oils (coconut oil, castor oil, cotton seed oil)
Modified starches
Plant materials used in food processing

Immediate elimination applies only to:

Non-sensitive products already liberalized under other FTAs

Consumer-Oriented Imports

The agreement enables calibrated access to consumer products that supplement domestic supply:

Tree nuts
Berries and processed fruits
Premium beverages
Select pet food products
Frozen fish (salmon, cod, Alaska pollock)
Yeast, margarine, abalone

Intermediate Goods and Technology Inputs

India facilitates access to critical inputs for manufacturing:

Rough diamonds and precious stones
Specialty chemicals for pharmaceuticals
Active pharmaceutical ingredients
Semiconductor wafers and fabrication inputs
Electronics components (IC substrates, sensors, microcontrollers)
Carbon fibers
Industrial enzymes
Aerospace components
Battery materials (lithium compounds, cathode materials)
Fertilizer inputs (phosphate rock, potash)

High-Technology Imports

The agreement supports technology advancement by facilitating access to:

Advanced medical devices (diagnostic imaging, surgical robotics)
AI chips and high-performance processors
Semiconductor manufacturing equipment
Cloud computing infrastructure hardware
Telecom and ICT network equipment
Clean energy technologies
Biotechnology research equipment
Data center infrastructure equipment

Non-Tariff Commitments

India commits to addressing several non-tariff barriers:

Medical devices: Remove long-standing barriers to U.S. medical device trade

ICT goods: Eliminate restrictive import licensing procedures that delay market access or impose quantitative restrictions

Standards alignment: Determine within six months whether U.S.-developed or international standards are acceptable for U.S. exports in identified sectors

Agricultural products: Address long-standing non-tariff barriers to U.S. food and agricultural products

Conformity assessments: Discuss standards and conformity assessment procedures for mutually agreed sectors

Purchase Commitments

India intends to purchase $500 billion in U.S. goods over five years:

Energy products
Aircraft and aircraft parts
Precious metals
Technology products
Coking coal
Graphics Processing Units (GPUs) and data center equipment.

Suggested Read: Union Budget 2026 – Complete Customs Overhaul Full Analysis

Why the US India Trade Deal is Good for the United States

Agricultural Market Expansion

The agreement provides U.S. agricultural exporters with preferential access to a market of 1.4 billion people with rising incomes. India’s growing middle class creates sustained demand growth for premium food products, tree nuts, fruits, wine, and processed foods where U.S. producers excel.

Strategic Diversification from China

Strengthening economic ties with India advances U.S. strategic objectives in the Indo-Pacific. The agreement’s supply chain cooperation and alignment on non-market economy policies support U.S. efforts to reduce economic dependence on China and build alternative supply chains.

Technology Hardware Demand

India’s digital infrastructure expansion creates substantial demand for U.S. technology hardware. The commitment to significantly increase technology product trade, particularly GPUs and data center equipment, benefits U.S. semiconductor manufacturers during a period of intense global competition in chip production.

Energy Export Growth

U.S. energy producers gain a major long-term customer. India’s energy import requirements—driven by economic growth and limited domestic fossil fuel resources—create sustained demand for U.S. LNG, crude oil, and refined products.

Aerospace Industry Benefits

Zero-tariff treatment for aircraft parts supports integrated aerospace supply chains. Combined with purchase commitments for aircraft and components, this strengthens U.S. aerospace manufacturers’ position in one of the world’s fastest-growing aviation markets.

Removal of Non-Tariff Barriers

India’s commitments to address long-standing barriers in medical devices, ICT goods, and agricultural products remove obstacles that have hindered U.S. exporters for years. Eliminating restrictive import licensing and accepting international standards reduces costs and delays for U.S. companies.

Digital Trade Framework Advantages

As the world’s largest exporter and importer of digitally delivered services, the U.S. benefits from structured digital trade rules. A framework that reduces regulatory barriers and facilitates cross-border data flows supports U.S. technology companies operating in India’s large and growing digital market.

Intellectual Property and Standards

Alignment with U.S.-developed or international standards in key sectors creates long-term advantages for U.S. exporters. Once standards are harmonized, U.S. products designed to those standards gain streamlined market access.

Why the Trade Deal May Be Problematic for the United States

Domestic Industry Competitive Pressure

Reduced tariffs on Indian textiles, apparel, leather, and footwear increase competitive pressure on remaining U.S. manufacturers in these sectors. While U.S. production has already declined substantially, workers and communities dependent on these industries face additional challenges.

Lost Tariff Revenue

Granting preferential 18% rates and zero-duty access on $86 billion in current Indian exports (with growth expected) represents substantial forgone tariff revenue. At a time of fiscal pressures, this revenue loss must be weighed against broader economic and strategic benefits.

Complexity and Enforcement Challenges

The agreement’s numerous provisions—rules of origin, tariff rate quotas, phased implementation schedules, standards alignment commitments—create administrative complexity. Effective enforcement requires robust monitoring and dispute resolution mechanisms.

Technology Transfer Concerns

Expanded exports of advanced semiconductors, AI chips, and high-performance computing equipment create technology spillover risks. While national security safeguards exist, increased technology trade always carries some risk of knowledge diffusion to competitors or potential adversaries.

Trade Relationship Asymmetries

India’s $500 billion procurement commitment is an intent, not a binding obligation. Actual purchases depend on commercial decisions, competitive pricing, and India’s economic conditions. If procurement falls short, the U.S. may perceive asymmetry in benefits.

Potential WTO Compliance Questions

Preferential bilateral tariff reductions outside a comprehensive free trade agreement may face questions about WTO compliance, particularly regarding most-favored-nation principles. While both countries maintain WTO membership, bilateral preferential treatment creates potential complications.

Limited Services Market Access

The agreement focuses primarily on goods trade with digital trade commitments deferred to the broader BTA negotiations. U.S. service exporters in sectors like banking, insurance, legal services, and professional services do not receive substantial new market access in this interim agreement.

Opportunity Costs with Other Partners

Resources and negotiating capital invested in the India agreement represent opportunity costs. Deeper agreements with other trading partners might yield greater economic benefits, depending on comparative market sizes, growth rates, and complementarities.

India-US Trade Deal vs Competing Economies

India US Trade Deal Impact on China

The agreement directly challenges China’s position in the U.S. market. With China facing 35% tariffs compared to India’s 18%, Indian exporters gain a 17 percentage point advantage. This is particularly significant in:

Textiles and apparel
Leather and footwear
Consumer goods
Home décor
Toys
Generic pharmaceuticals

The agreement accelerates the “China plus one” diversification strategy pursued by multinational companies seeking supply chain resilience.

India US Trade Deal Impact on Vietnam and Bangladesh

Vietnam and Bangladesh, major textile and apparel exporters facing 20% U.S. tariffs, find themselves at a disadvantage against India’s 18% rate. While the difference is smaller than with China, it nevertheless impacts competitiveness in price-sensitive markets.

Bangladesh’s ready-made garment sector, heavily dependent on U.S. market access, faces particular pressure. Vietnam’s diversified export base provides some insulation, but its textile and footwear sectors compete directly with India.

India US Trade Deal Impact on ASEAN Nations

Malaysia, Indonesia, Philippines, Cambodia, and Thailand all face 19% tariffs—one percentage point higher than India. While seemingly modest, in high-volume, low-margin manufacturing sectors, this difference affects competitive positioning.

The agreement may prompt ASEAN nations to seek their own preferential arrangements with the United States to restore competitive parity.

Impact on Latin American Suppliers

Mexico and Central American countries with existing USMCA or CAFTA-DR agreements maintain zero or very low tariff access to the U.S. market. The India agreement does not directly disadvantage them, but India’s emergence as a preferred supplier for certain categories may shift sourcing patterns away from Latin America in products where India offers superior cost structures despite the 18% tariff.

Long-Term Strategic Implications Of India US Trade Deal

Geopolitical Realignment

The agreement represents significant geopolitical realignment in the Indo-Pacific. By strengthening economic interdependence, the U.S. and India deepen strategic partnership beyond defense and diplomatic cooperation. This creates a counterweight to China’s economic influence in Asia.

Supply Chain Resilience

The agreement advances both countries’ supply chain resilience objectives. The U.S. reduces dependence on China-centered supply chains while India integrates more deeply into U.S.-led global value chains. This mutual reinforcement supports long-term economic security for both nations.

Technology Cooperation Framework

Beyond immediate trade benefits, the agreement establishes frameworks for technology cooperation in semiconductors, artificial intelligence, quantum computing, and biotechnology. This positions both countries for joint leadership in emerging technology sectors.

Digital Economy Integration

With India as the 5th largest digital services exporter and the U.S. as the largest importer, structured digital trade rules create a foundation for deeper digital economy integration. This extends beyond the bilateral relationship to potentially influence global digital trade governance.

Climate and Clean Energy

The agreement facilitates trade in clean energy technologies, supporting both countries’ climate objectives. U.S. clean energy technology exports to India and India’s renewable energy manufacturing growth create opportunities for climate-aligned economic cooperation.

Negotiating Template

The agreement may serve as a template for U.S. trade relationships with other partners. Its structure—preferential reciprocal tariffs, sectoral safeguards, phased implementation, and technology cooperation—could influence future U.S. bilateral trade frameworks.

Frequently Asked Questions

What is the India-US trade deal tariff rate?

The India-US trade deal establishes an 18% reciprocal tariff rate for most Indian goods entering the United States, reduced from previous rates as high as 50%. Additionally, zero-duty access applies to specific categories including generic pharmaceuticals, gems and diamonds, aircraft parts, and $1.36 billion in agricultural exports. India receives preferential treatment compared to competitors: China faces 35%, Vietnam and Bangladesh 20%, and other Asian nations 19%.

How much trade happens between India and the United States?

India’s total exports to the United States stood at $86.35 billion in 2024. India maintains an agricultural trade surplus of $1.3 billion with the U.S., exporting $3.4 billion in agricultural products while importing $2.1 billion. In digital services, India exported $0.28 trillion in digitally delivered services globally in 2024, with the United States being a major destination. The agreement commits India to purchase $500 billion in U.S. goods over five years.

What agricultural products does India get duty-free access for?

India receives zero additional U.S. duty access for $1.36 billion in agricultural exports, including spices, tea and coffee extracts, coconut and coconut oil, tree nuts (areca nuts, cashews, chestnuts), fruits (avocados, bananas, guavas, mangoes, papayas, pineapples), mushrooms, sesame and poppy seeds, bakery products, and processed products like fruit pulp and juices. Within this, $1.035 billion receives assured zero reciprocal tariff treatment for stability.

What sensitive agricultural sectors does India protect?

India fully protects highly sensitive agricultural sectors including all dairy products (milk, cream, butter, ghee, paneer, cheese), meat and poultry, major cereals (rice, wheat, corn, millets like jawar and bajra), pulses (green peas, chickpeas, mung beans), oilseeds, select fruits (bananas, strawberries, cherries, citrus), sugar, groundnuts, honey, non-alcoholic beverages, flour, essential oils, ethanol for fuel, and tobacco. These receive no tariff concessions and remain fully protected from U.S. imports.

How does the deal benefit Indian textile exports?

Indian textile tariffs drop from 50% to 18%, with silk receiving 0% duty access, opening opportunities in a $113 billion U.S. market. This covers readymade garments, carpets, cotton and man-made textiles, bedspreads, yarn, baby clothing, bed linen, blankets, and gloves. The 18% rate provides competitive advantages over China (35%), Vietnam (20%), and Bangladesh (20%), potentially supporting significant job creation across India’s textile production clusters.

What technology does India gain access to through this deal?

India gains facilitated access to advanced semiconductors, AI chips and high-performance processors, semiconductor manufacturing equipment, cloud computing infrastructure, telecom and ICT equipment, advanced medical devices including diagnostic imaging and surgical robotics, clean energy technologies, biotechnology research equipment, quantum computing components, and data center infrastructure equipment. This supports India’s digital transformation while maintaining national security safeguards.

Does the deal harm Indian farmers?

The agreement protects Indian farmers by excluding all highly sensitive products—dairy, meat, major cereals, pulses, oilseeds, and key fruits—from liberalization. Products that receive limited access use tariff rate quotas (almonds, walnuts, pistachios) or long phase-in periods (up to 10 years) providing adjustment time. India maintains its $1.3 billion agricultural trade surplus with the U.S. and gains zero-duty access for $1.36 billion in exports, primarily benefiting spice, tea, coffee, and specialty crop farmers.

Updated for 2026: This analysis reflects the India-US Bilateral Trade Agreement framework announced in February 2026 and incorporates official government data on trade volumes, tariff structures, and sector-specific commitments as released by both countries’ commerce ministries.

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