As February begins, the United States has lowered its tariffs on Indian goods. After months of negotiations, the US and India reached a trade deal that reduces US tariffs on Indian products from 25% to 18%. President Trump also said that India has agreed to stop buying Russian oil, which would remove the 25% punitive duty. Prime Minister Modi announced that products made in India will now face an 18% tariff. What does this mean for people and businesses involved in US-India trade? Besides possibly seeing lower prices at your local Indian grocery store, here are a few things to watch for.
- Expanded Market Access: India agreed to better market access for US manufacturers and producers. However, it is important to note that India is a big agricultural economy, and it would not be surprising if the export of certain agricultural products from the US still faces market access problems and trade barriers in India. Nevertheless, this shift creates new openings for US exporters, particularly those prepared to navigate regulatory and customs rules.
- Zero Tariffs on Key US Industrial Goods: US Trade Representative Jamieson Greer stated that the trade deal would reduce India’s tariffs on US industrial goods to zero and would eliminate duties on tree nuts, fruits, vegetables, and wine. These changes create immediate pricing advantages and new negotiating leverage with distributors and counterparties in India.
- Supply Chain Re-Optimization: If you have previously moved manufacturing or sourcing away from India, the revised tariff rate now places India on equal footing with regional competitors like Indonesia and Bangladesh. Businesses that revisit their sourcing models may uncover meaningful cost savings.
- Eased Export Controls: Indian imports of critical technology, hardware, software, technical data, technical information, and technical descriptions subject specifically to the Export Administration Regulations would likely ease up.
- Continued Section 232 Exposure Requires Planning: Not all tariffs are going away. Tariff risks under Section 232 of the Trade Expansion Act will likely remain. Sectors such as aluminum, steel, copper, and automobiles are still affected, as these tariffs are imposed by the US based on national security reasons. Indian exporters in these sectors must continue to plan for compliance, and risk allocations in contracts and pricing.
Conclusion
Navigating trade deals can be complicated and often require expert advice to comply. Avoiding missteps can erase potential gains. Centre Law works with importers, exporters, manufacturers, and distributors to turn regulatory change into commercial advantage.
If you would like to explore how the US-India trade deal can improve margins and streamline your supply chain, and ensure compliance, contact the authors at ssivakumar@centrelawgroup.com, jpayne@centrelawgroup.com or the Centre Law attorney with whom you normally work.
