India-US trade pact slashes duties

• US cuts duties on Indian goods.
• Apparel, footwear sectors to gain.
• Leather exports may rise 30%.

A landmark interim trade agreement between India and the US is paving the way for a substantial export boom. Learn how this pact slashes import duties, offering a vital lifeline to India's labor-intensive sectors and boosting global competitiveness.

Export Opportunities Unveiled

India's export landscape is poised for a significant transformation, particularly within its labor-intensive industries, thanks to a newly established interim trade agreement with the United States. This crucial pact introduces a reduction in import duties on a variety of Indian goods entering the US market. The move is anticipated to provide a substantial impetus to sectors that rely heavily on a large workforce, including the apparel, footwear, and home decor industries. Specifically, the US has taken steps to remove previously imposed punitive duties, while reciprocal tariffs between the two nations are also slated for a decrease, thereby enhancing the cost-effectiveness of Indian products for American consumers and businesses alike. This strategic recalibration of trade policies is expected to inject new vigor into India's export economy, fostering greater international trade and strengthening bilateral economic ties.

Tariff Reductions Detailed

Under the initial phase of the bilateral trade agreement, both India and the US have committed to reducing import duties on numerous products, a development that promises to amplify two-way trade. The United States, in particular, will be lowering tariffs on Indian goods, bringing them down to an 18 percent mark. Significantly, the US has lifted the previously levied 25 percent additional duty on Indian merchandise. Furthermore, the corresponding 25 percent reciprocal tariffs are expected to be scaled back to 18 percent in the near future. This duty reduction encompasses a broad spectrum of Indian exports, including textiles and apparel, leather and footwear items, plastic and rubber products, organic chemicals, home decor, artisanal crafts, and specific types of machinery. Additionally, the pact will see reduced duties on gems and diamonds, as well as aircraft parts. In return, India will grant a preferential tariff rate quota for automotive components, showcasing a mutually beneficial trade arrangement.

Sectoral Impact Analysis

The implications of this trade agreement are far-reaching, especially for India's labor-intensive sectors, which had previously faced challenges due to substantial tariffs. For instance, the apparel sector experienced a modest export growth of 2.36 percent, reaching USD 11.6 billion between April and December of the 2025-26 fiscal year, with the US being its primary market. Industry leaders anticipate a significant uplift; the Apparel Export Promotion Council (AEPC) chairman noted that tariff eliminations will bolster the global competitiveness of the Indian textile and apparel industry. Similarly, the leather and footwear sector, which saw a slight dip of 0.23 percent to USD 3.3 billion during the same period, is projected to see a substantial increase in exports, potentially by 30 percent in the first year post-implementation, according to the chairman of the Council for Leather Exports (CLE). Current exports to the US stand at approximately Rs 15,000 crore, supporting about 42 lakh jobs, and this deal is expected to provide a major boost. The diamond sector, which had experienced a sharp decline of over 60 percent in exports to the US from USD 3.64 billion in April-December 2024 to USD 1.45 billion in April-December 2025 due to tariff impacts, is hopeful that the interim agreement will lead to full zero-duty treatment, thereby restoring its market competitiveness.

Broader Benefits and Future Outlook

Beyond apparel and footwear, the trade pact extends its benefits to a wider array of Indian products, including machinery parts, aircraft components, basic automotive parts, coins, platinum, essential oils, home decor items, inorganic compounds, paper, plastic, and natural rubber. Commerce and Industry Minister Piyush Goyal highlighted that these items will now enjoy zero reciprocal tariffs. This comprehensive tariff reduction strategy is designed to enhance the overall competitiveness of Indian exports across various industries in the US market. The agreement signifies a crucial step towards fostering stronger economic ties and a more balanced trade relationship between the two nations, aiming to create a more favorable environment for Indian businesses looking to expand their global reach and contribute to the nation's economic growth.