New Delhi: India and the United States have announced a landmark trade agreement that will sharply reduce tariffs on a wide range of Indian exports to the American market, offering relief to several labour-intensive sectors. However, the deal leaves out a significant chunk of exports—worth more than ₹66,000 crore—that will continue to face elevated duties under the US Trade Expansion Act’s Section 232, tempering expectations of a broad-based export boost.
Under the agreement, tariffs on most Indian goods exported to the US will be reduced from 50% to 18%, a move expected to significantly improve price competitiveness for Indian exporters and revive trade momentum. Sectors such as textiles, shrimp feed, and gems and jewellery, which have a strong footprint in the US market, are seen as the biggest immediate beneficiaries.
Trade analysts say the tariff reduction could help Indian exporters claw back market share lost over the past few years due to higher duties, rising logistics costs and global supply chain disruptions. For labour-heavy industries like textiles and gems and jewellery, the cut is expected to translate into improved margins and stronger order inflows, particularly ahead of peak demand seasons in the US. However, the relief is not universal.
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Section 232 sectors remain untouched
Despite the broad tariff rollback, products falling under Section 232 of the US Trade Expansion Act of 1962 have been kept outside the scope of the agreement. These include automobiles, steel, aluminium, copper, timber, trucks and ships, which Washington classifies as strategically sensitive on national security grounds.
Available trade data shows that exports under Section 232 account for nearly one-tenth of India’s total exports to the US, amounting to over ₹66,000 crore annually. This means a sizeable portion of Indian exporters will continue to face the same tariff barriers despite the headline concessions announced in the deal.
The automobile sector is the most exposed, with exports to the US estimated at around ₹33,000 crore a year. Steel exports, valued at roughly ₹20,700 crore, and aluminium shipments of about ₹6,600 crore also remain fully subject to existing duties. Together, these three segments account for nearly 85% of Indian exports that continue to fall under Section 232 restrictions.
Trade experts note that similar carve-outs have been a feature of earlier US trade agreements with other countries as well, highlighting Washington’s consistent reluctance to dilute tariffs in sectors it views as critical to domestic manufacturing and security.
Mixed impact for exporters
Industry representatives say the deal delivers clear gains for consumer-facing and labour-intensive sectors, but offers limited comfort to exporters in heavy industries who were hoping for more comprehensive relief.
For companies operating in textiles, marine products and jewellery, the tariff cut is expected to enhance competitiveness against suppliers from Southeast Asia and Latin America. Lower duties could also encourage exporters to scale up capacity and invest in higher value-added products tailored specifically for the US market.
In contrast, exporters in automobiles and metals are likely to see little immediate change in demand conditions. Elevated tariffs continue to weigh on pricing, making Indian products less competitive compared to US-based manufacturers or suppliers from countries that enjoy preferential access.
Analysts point out that while the agreement improves sentiment and signals a thaw in bilateral trade relations, its economic impact will remain uneven unless follow-up negotiations address the Section 232 exclusions.
Strategic and market implications
From a macroeconomic standpoint, the trade deal is being viewed as a positive signal for global investors assessing India’s export outlook at a time of slowing global growth. Market participants believe the tariff reduction could support export earnings in the near term, especially if consumer demand in the US remains resilient.
However, economists caution that the continued application of Section 232 tariffs underscores the limits of the agreement. Without relief for capital-intensive sectors such as steel and automobiles, the overall export upside may fall short of initial expectations.
There is also concern that prolonged exclusion of these sectors could prompt exporters to redirect shipments to alternative markets, gradually reshaping India’s export geography over the medium term.
What lies ahead
Trade watchers say the agreement should be seen as an important—but partial—step in resetting India–US trade ties. Further negotiations are likely to be needed to resolve outstanding issues around strategic sectors and long-standing tariff barriers.
For now, the deal delivers meaningful gains for select industries while leaving a substantial slice of India’s US-bound exports exposed to high duties. As exporters recalibrate strategies, the true impact of the agreement will hinge on whether future talks can bridge the gap between headline tariff cuts and sector-specific realities.
