Garments, leather, footwear set to gain as India-US trade deal lowers tariffs to 18%

A tariff deal between
India and the United States has eased industry uncertainty, with the cut to an 18 per cent duty expected to give Indian exporters a firmer foothold in the US market. The announcement of the
India-US trade deal has come as garment, leather and footwear manufacturers, having just shipped containers for the summer season, were concerned about orders for the next cycle.

Smaller players had nearly halted shipments in recent months, while larger firms continued by offering steep discounts, with
US buyers also absorbing part of the pressure. With the deal in place, Indian goods are seen as more competitive, and products will face an 18 per cent additional tariff over the MFN or product-specific rate.

Sector-wise impact of new tariff level

At 18 per cent, the duty on Indian garments will be slightly lower than the 20 per cent applied to those made in Bangladesh or Sri Lanka. Indian carpets, which had lost considerable market share, are set to compete more effectively with those from Turkey, while shrimps are expected to be more affordable in American stores. Gems and jewellery exporters also stand to benefit after losing their competitive position. With levies on several Chinese products at 34 per cent, Indian goods will hold a slight advantage.

Some sector-specific tariffs, including those on auto parts and metals, will, however, remain.

With India having signed trade agreements with the UK and the European Union, companies are expected to rebalance portfolios by diversifying export destinations and hedge against possible policy shifts by Trump in the future.

India’s exports to the US rose 11.3 per cent to $59 billion between April and November, led by a doubling of smartphone shipments to $16.7 billion. Frontloading of exports ahead of the tariff deadline that began from Aug also supported shipments during this period. Nearly 40 per cent of India’s exports, including electronics and pharma, were not affected by the tariffs.

Leaders welcome the agreement

“A big day for India-US relations as the trade deal has been locked with a significantly reduced tariff of 18%, paving the way for stronger trade ties and mutual growth… This historic deal will elevate our strategic partnership and greatly benefit both nations and their people. Business between India and US set to flourish further,” Union Home Minister Amit Shah posted on X.

Commerce and Industries Minister Piyush Goyal said the deal “unlocks the power of two large democracies working together for shared prosperity of their people. Both India and US are natural allies and our partnership will co-create technologies, co-develop solutions, and work together for peace, growth, and a brighter future for India and the US”.

“US and India have complementary strengths. Both countries can co-create technologies and co-develop solutions that will benefit the world. Trade deal between US and India will lead to brighter future for both countries. India-US trade deal is a win-win deal. Citizens and industries of both countries will benefit greatly from this deal,” IT and I&B minister Ashwini Vaishnaw said.

Businesses also reacted positively. Aditya Birla Group chairman Kumar Mangalam Birla said, “The Aditya Birla Group is the largest Indian investor in the US, and we see this agreement helping shape more resilient supply chains, unlocking manufacturing opportunities and driving long-term economic competitiveness in both the US and India.”

US Secretary of Agriculture, Brooke Rollins, wrote on X, “Thank you @POTUS for ONCE AGAIN delivering for our American farmers. New US-India deal will export more American farm products to India’s massive market, lifting prices, and pumping cash into rural America. In 2024, America’s agricultural trade deficit with India was $1.3 billion. India’s growing population is an important market for American agricultural products and today’s deal will go a long way to reducing this deficit. America First victory on top of the dozens of deals for ag”