India and the United States have entered a new phase in their economic partnership. In a significant breakthrough, Washington has reduced tariffs on ‘Made in India’ goods to 18 per cent. The development is being seen as a turning point for Indian exporters who have been navigating months of uncertainty and elevated tariff barriers.
But beyond the headline number, what does this trade deal really mean? Which industries are likely to benefit the most? And how quickly could the gains show up on the ground?
What Has Changed And Why It Matters
The Federation of Indian Export Organisations (FIEO) has welcomed the agreement, calling it a milestone in strengthening bilateral trade ties, reported IANS. The tariff reduction from earlier levels, which in some cases had risen to around 50 per cent after August 27, 2025, down to 18 per cent is expected to significantly improve the competitiveness of Indian goods in the US, India’s largest export market.
The US President confirmed that the revised 18 per cent reciprocal tariff would take effect immediately. Prime Minister Narendra Modi also acknowledged the development, stating that reduced tariffs on Indian products would benefit exporters and thanking the US administration for the move.
For exporters, this relief comes after months of pressure. Higher tariffs had raised landed costs, squeezed margins and weakened demand in the US market. With duties now lowered, companies are expected to see improved price parity and renewed buyer confidence.
Textile & Apparel: The Immediate Winner
Among the biggest beneficiaries are textiles and apparel. Moneycontrol reports that the US accounts for nearly 28 per cent of India’s total textile exports, making it the single largest destination.
This sector is highly price-sensitive and competes directly with countries such as Bangladesh and Vietnam. Even small tariff differences can determine sourcing decisions by large US retailers. The reduction to 18 per cent narrows the pricing gap and could unlock orders that were previously delayed.
FIEO President SC Ralhan noted that the agreement enhances competitiveness and offers a strong push to export growth, particularly for MSMEs operating in labour-intensive industries like apparel, leather and footwear.
Industry participants expect quicker volume recovery and improved order visibility in the coming months.
Engineering Goods: Margin Relief
Engineering goods form the largest share of India’s merchandise exports to the US. These include industrial machinery, electrical equipment and capital goods.
Given that many of these exporters operate on thin single-digit margins, tariff reductions can have a direct impact on profitability. Lower duties improve India’s standing against East Asian competitors and provide exporters stronger leverage during contract renewals.
Chemicals And China-Plus-One Advantage
In speciality chemicals and intermediates, tariffs directly affect net realisations under long-term supply contracts. The tariff cut strengthens India’s position in US supply chains that are diversifying under China-plus-one strategies.
The benefit here may not be instant in terms of volumes, but improved pricing flexibility and better integration into global value chains are seen as long-term positives.
Gems, Jewellery, And Seafood: Cost Advantage Returns
Gems and jewellery exporters, particularly in cut and polished diamonds and gold jewellery, are expected to gain from reduced landed costs in the US. Lower tariffs ease pressure on retail pricing for wholesalers.
Similarly, seafood exporters, especially shrimp suppliers, could see demand stabilise as costs fall for US buyers.
Dhiraj Relli, MD & CEO of HDFC Securities, noted that at 18 per cent, India’s tariff rate is now lower than that of several major Asian trading partners. This, he suggested, supports growth in labour-intensive export sectors such as textiles, gems and jewellery, and engineering goods.
Strong Push For ‘Make In India’
Commerce and Industry Minister Piyush Goyal described the agreement as one that unlocks opportunities for farmers, MSMEs and skilled workers, calling it more than just a trade arrangement.
Prabhat Kumar, Chairman (IRS), Pan IIT Alumni India, highlighted its importance for high-technology sectors. He indicated that improved market access for engineering goods aligns with the “Make in India” initiative and supports technology collaboration, especially in areas linked to recent budget proposals.
Rajeev Juneja, President of PHDCCI, suggested that lower tariffs signal a renewed commitment to trade openness. In his view, reduced duties help cut input costs, ease supply chain pressures and support key sectors including manufacturing and technology.
Meanwhile, former Finance Commission chairman Arvind Panagariya praised the agreement as a major achievement in bilateral negotiations.
The tariff rationalisation is expected to lead to the release of orders that had been placed on hold, especially in labour-intensive sectors where buyers typically finalise sourcing months in advance.
While detailed implementation aspects remain to be seen, the direction is clear: improved tariff certainty, stronger price competitiveness and renewed confidence among global buyers.
For Indian exporters, the 18 per cent rate is not merely a number. It is a reset button — one that could shape export momentum in 2026 and beyond.
As markets respond and supply chains adjust, the coming quarters will reveal how deeply this deal reshapes India’s export story.
