India safeguards sensitive sectors in US trade deal; exporters set to gain
India has safeguarded sensitive agriculture and dairy sectors in the US trade deal, while Washington reduces tariffs on Indian goods from 50% to 18%. Labour-intensive sectors like apparel, footwear, and jewellery are set to benefit, with a joint statement to be issued soon
New Delhi: India has built guardrails to protect sensitive agriculture and dairy sector in the concessions it has agreed with the US in exchange for Washington lowering tariffs on Indian goods – a move that is seen pushing up exports from labour-intensive sectors like apparel, footwear and jewellery.
Hours after US President Donald Trump announced cut in US tariffs on Indian goods to 18 per cent from 50 per cent in exchange for India lowering trade barriers as well as stopping its purchases of Russian oil and instead buying oil from the US and potentially Venezuela, Union ministers Nirmala Sitharaman and Piyush Goyal said the move augurs well for the economy in general and exporters in particular.
But with little details available about the actual agreement between the two sides, opposition parties attacked the government for selling out the interests of Indian farmers.
Goyal, in a news conference, said a joint statement will be issued by both countries “shortly”, which will have details of the pact, but rest assured, the government has built enough safeguards that will ensure protection for sensitive sectors.
There may be duty concessions on some imports from the US, but no duty-free imports will be allowed in crops and agri products that are important for the country.
Sitharaman in an interview to PTI Videos said, “So, actually our exports will pick up now, that is my expectation… along with having found new markets where they will continue to operate.” The new 18 per cent levy undercuts tariffs on key regional competitors such as Vietnam and Bangladesh, both facing duties of 20 per cent, restoring India’s price advantage in the US market. The move offers significant relief to a broad range of labour-intensive exports, including apparel, footwear and jewellery makers, which had been hit by punitive 50 per cent tariffs imposed in August, sharply denting competitiveness and order flows.
The punitive US tariffs caused India’s bilateral trade surplus with the US to shrink by USD 2.5 billion each month on average during September-December 2025 (versus the monthly average in January-August 2025), according to HSBC Global Investment Research. There was also USD 14 billion of equity outflows by foreign investors since July 2025 amid weak sentiment.
Goyal said that the agreement will open huge opportunities for Indian labour-intensive sectors, such as textiles, plastics, apparel, home decor, leather and footwear, gems and jewellery, organic chemicals, rubber goods, machineries and aircraft.
Import duty on most of these sectors will come down soon to 18 per cent from the present 50 per cent in the US markets.
The Minister said that India is a fast-growing and large economy and demand is continuously increasing for goods such as ICT products, data centre equipment, high-quality technology and innovation items, and raw materials.
“And in that situation, this deal also opens up opportunities for India to get the best-in-class, world-class technologies to further power the India growth story,” he told reporters here.
He added that India has got a “very good” trade deal with the US, better than the competitors.
Trump’s announcement via a social media post late Monday night is part of a general agreement under which India has apparently agreed to stop buying Russian oil, reduce “their tariffs and non-tariff barriers against the United States to zero”, and India buying an incremental USD 500 billion of “US energy, technology, agricultural, coal, and many other products” over the next five years.
On Russian oil
The commitment to stop buying Russian oil nullifies the additional 25 per cent punitive tariff previously levied, and thereby reduces the effective applied tariff on Indian exports to the US to 18 per cent from 50 per cent.
The major countries which compete with Indian labour-intensive sectors in the global markets include China, Vietnam (20 per cent), Malaysia (19 per cent), Bangladesh (20 per cent), Cambodia and Thailand (19 per cent each).
Without giving details of what has been agreed with Washington, Goyal said the trade deal is in the final stages, and an Indo-US joint statement will be issued shortly detailing the contours of the agreement.
Sectors such as leather and footwear, marine products (including shrimp), chemicals, plastics and rubber, home decor and carpets, machinery, and select agricultural products, including processed items, will gain a major advantage in the US market vis-a-vis competing nations as the American duties will come down to 18 per cent.
“These goods will now get the best rates in the US,” a source said, adding that different Indian clusters like Tirupur (apparels), Surat (gems and jewellery), which were affected by the high tariffs, will now gain.
India’s exports from these sectors stood at USD 30 billion to the US. Now duties on these will come down to 18 per cent from 25 per cent. The country’s shipments worth USD 4 billion are already in the exempted category like minerals and natural resources, and certain agri products.
Pharma and mobile phones
Further, pharma and mobile phones worth USD 25 billion are also out of the ambit of US tariffs. Though the US is a major market for these segments of goods, Indian exporters have started diversifying their sales in other countries.
India has agreed to grant duty concessions in sectors in the same manner as it has done under other free trade agreements (FTAs).
While import duties will be eliminated in certain areas on the day the agreement comes into force, in others they will be phased out over time. In some sectors, duties will be reduced, while in others quota-based concessions will be provided.
India has always kept out sensitive sectors such as dairy, rice, wheat, meat, poultry, cereals, GM foods, soymeal, and maize out of the ambit of its trade agreements.
On Trump’s statement that India has committed to buy USD 500 billion worth of American goods such as energy, technology, agricultural items, coal, and other goods, sources said it would be over five years, and will also include the purchase of aircraft and parts.
“…we will be importing goods worth USD 50-55 billion, for data centres alone we will need goods worth USD 20 billion a year,” the source said.
