18% tariffs, boost to exports, agriculture protected: How India benefits from trade deal with US? Explained

India-US trade deal (AI image)

India and the US have released a joint statement for the interim trade deal agreement, which is expected to formally be signed in the coming weeks. With this, the reciprocal tariff rate on India’s exports comes down to 18%. Simultaneously, US President Donald Trump has also signed an executive order revoking the 25% tariffs that had been imposed on India for its purchase of crude oil from Russia.“The US and India are pleased to announce that they have reached a framework for an Interim Agreement regarding reciprocal and mutually beneficial trade,” the joint statement said. Even as tariffs on India are slashed, on its part India will do away with or cut down import duties on all US industrial goods and some US food and agricultural products.

After months of intense negotiations, what does the interim trade deal mean for India? Which sectors will benefit? And what about the sensitive sectors of agriculture and dairy? We decode:

How does the trade deal benefit India? Sector-wise impact

Fundamentally, with an 18% tariff rate, India gets a competitive advantage compared to regional peers in labour intensive export driven sectors. India’s 18% tariff is lower than that of Vietnam, Bangladesh, China, Thailand, Pakistan, and Indonesia. India’s 18% tariff rate is also a steep cut from the 50% tariff imposed by the Trump administration in August 2025.

According to Commerce Minister Piyush Goyal, the trade deal opens a $30 trillion market access for Indian exports. In this regard, the interim trade deal will especially benefit MSMEs, farmers and fishermen.Sector-specific benefits will accrue to textiles, leather, gems and jewellery, pharmaceuticals, machinery, automobiles etc. Several labour-intensive sectors will stand to gain from the trade deal:

On several products the tariffs will go down to zero, such as gems and diamonds, aircraft parts, generic pharmaceuticals. This will benefit India’s ‘Make in India’ push.India will also get a preferential tariff rate quota for automotive parts. This will be subject to tariffs imposed to eliminate threats to national security.

India and the US will also look to enhance the trade in technology products. This includes Graphics Processing Units and other goods used in data centres, and expand joint technology cooperation.Some of the other benefits cited by the government are:

Sachchidanand Shukla, Group Chief Economist at Larsen & Toubro said, “This looks like a good deal based on the joint statement. No sensitive agricultural & dairy opening has happened. Plus, there is preferential access for our auto, pharma, industrial and metal industries. The commodities given access under agriculture, e.g. soya oil, animal feed etc are not sensitive and manageable. Of course, the final text & implementation will matter.”Ranen Banerjee. Partner and Leader, Economic Advisory Services Government Sector Leader, PwC India explains: Indian exporters of job intensive sectors like textiles, leather and jewellery are going to get market access at the lowered tariff rates making them competitive.

India-US trade deal explained in 10 points

“Given that Indian exporters had reoriented their exports to other markets over the last two quarters, they will get an additional fillip from the US market access,” he told TOI.Referring to India’s commitment of buying $500 billion in US energy, energy products, aircraft and aircraft parts, precious metals, technology products, and coking coal, Banerjee pointed out that energy, defence and aircraft imports have to be done by India and hence it is not an additional import burden.However, Ajay Srivastava from Global Trade Research Initiative (GTRI) strikes a cautionary note: “India’s interim trade deal with the United States offers some relief on tariffs, but a closer reading suggests an uneven exchange. Washington has relaxed punitive reciprocal tariffs—cutting them from 50% to 18% on about 55% of Indian exports—without reducing its MFN tariffs at all.”

Agriculture Protected

According to the joint statement, India has opened access to some US agricultural products such as dried distillers’ grains, red sorghum for animal feed, tree nuts, soybean oil, fresh and processed fruit, wine and spirits.However, the government and experts point out the sensitive sectors in agriculture and dairy have been protected.India has fully protected products such as milk, cheese, wheat, rice, maize, soya, poultry, ethanol (fuel), tobacco, certain vegetables and meat. No duty concessions will be granted to the US on these goods.According to estimates, 50% of India’s population is still reliant on agriculture for its livelihood. Hence, the country looks at the sector as a sensitive one. Import or customs duties are important for staple crops, dairy and key farm products that help sustain rural livelihoods.

“The agreement agreement reflects India’s commitment to safeguarding farmers’ interests and sustaining rural livelihoods by completely protecting sensitive agricultural and dairy products, including maize, wheat, rice, soya, poultry, milk, cheese, ethanol (fuel), tobacco, certain vegetables, meat, etc,” Piyush Goyal highlighted.Ranen Banerjee of PwC said that while the exact contours of the deal have to be announced, some of the announcements made regarding agricultural imports are of products that are at the premium end of the consumption basket.“The consumers of those products are less price sensitive and the price points of such products will continue to be higher than the Indian agricultural competing products, if any,” he told TOI.“In addition, if we look at the two items mentioned in the text of red sorghum and dried distillers grain – both these are going to be in high demand while production is a challenge. The ethanol mix in petroleum as per policy will require higher ethanol production and maize being the preferred input for the same can cause challenges to other grain production domestically,” he said.Also, with petroleum consumption going up, it would not be possible to have enough feed for ethanol production without imports, he explains.Similarly, owing to high growth in animal husbandry and poultry as allied services in the agri sector , the demand for animal feed is going to be very high and rising prices of the same would put stress on farm incomes. Import of red sorghum and dried distillers grain will therefore aid the growth of poultry and animal husbandry supporting farm incomes, Banerjee adds.The US is India’s single largest trading partner. It accounts for about 18% of India’s total exports. The imports stand at 6.22%, while the bilateral trade is at 10.73%. In 2024-25, the bilateral trade hit $186 billion of which $86.5 billion were exports and $45.3 billion were imports.India has a trade surplus with the US. Trade surplus is the difference between imports and exports. In 2024-25, this was at $41 billion in India’s favour. It has increased from $35.32 billion in 2023-24 and $27.7 billion in 2022-23.With a trade deal set to be signed in the coming weeks, India stands to gain in a big way, though as experts note, the fine print needs to be read.