India-US Trade Deal Protects Farm Sectors, Cuts Tariffs to 18%

The official's remarks have come amid speculation about agricultural market access concessions that India may have offered to secure the tariff reduction.

The government has adopted an approach to agricultural imports that ensures protection for sensitive farm products while maintaining consistency with India's established Free Trade Agreement (FTA) template.

Only the least sensitive agricultural products--those India routinely offers to all FTA partners, including in the UK FTA--will receive immediate zero-duty access.

Reinforcing India's strong position in agricultural trade, the official pointed out that India enjoys a substantial surplus of USD 1.3 billion in agricultural trade with the United States.

India exports USD 3.4 billion worth of agricultural products to the US annually, while importing only USD 2.1 billion, demonstrating the competitiveness of Indian agriculture in the American market.

"This deal will only strengthen our agricultural export position while protecting our sensitive sectors," the official added.

While protecting agricultural sensitivities, India has secured significant market access for its employment-intensive export sectors that were facing punitive 50% tariffs.

The textile and apparel industry, which ships over USD 10 billion worth of products to the US annually, will benefit from the reduced 18 per cent tariff. Other labour-intensive sectors including leather and footwear, marine products, chemicals, plastics and rubber, home decor, carpets, machinery, and certain agricultural export products will also gain substantially.

"These products, which are employment-intensive and labour-intensive, were a key concern for us. They are now going to get the best rates," the official said.

The agreement provides India with a strategic edge over key competitors including Vietnam, Indonesia, China, Malaysia, Thailand, Bangladesh, and Cambodia, all of which face much higher US tariffs.

"India will have a clear advantage with lower tariffs compared to our competitor countries," the official noted, adding that this differential treatment would boost India's manufacturing competitiveness and potentially attract investment away from higher-tariff jurisdictions.

In addition to the general tariff reduction, the US has completely withdrawn the 25% tariff it had imposed on India's crude oil purchases from Russia.

Officials highlighted that the announcement's timing is particularly favorable. Despite earlier tariff threats, Indian exports had remained stable due to existing contracts, replacement orders, and inventory building.

"With this announcement, all these contracts will now get a new lease of life," a source said, suggesting sustained and potentially expanded export momentum.

India has agreed to reduce automobile duties, but only for higher-end vehicles, thereby protecting the domestic automobile manufacturing sector while catering to the premium car market.

The trade understanding includes India's commitment to purchase USD 500 billion worth of American products over five years, concentrated in oil and LNG, aircraft and aircraft parts, precious metals and diamonds, and high-tech products including semiconductor chips, data centers, and servers.

While an understanding has been reached, the offcial clarified that the process will unfold in phases. A joint statement will first outline the contours of the agreement, capturing the understanding on all key aspects.

"The joint statement will be followed by an exhaustive legal agreement to give all the details pertaining to the trade agreement," the official explained. "This will culminate in the signing of the first phase of the trade deal."

Commerce and Industry Minister Piyush Goyal, who addressed a press conference on Tuesday, said Prime Minister Narendra Modi has always championed the agriculture and dairy sectors, safeguarding their interests and noted the sensitive factors of India's economy, particularly agriculture and dairy, have been protected in the India-US trade deal.

He said that MSMEs, the country's engineering sector and sectors such as textiles, gems and jewelry, leather goods and marine goods will all get numerous opportunities.

The Minister said that sensitive factors of India's economy, particularly agriculture and dairy, have been protected in the trade deal.

"PM Modi has always championed both the agriculture and dairy sectors, safeguarding their interests and working tirelessly to ensure a bright future and ample opportunities for the people in this sector. I am pleased that the entire country understands and appreciates this, and it resonates deeply with them. The sensitive factors of India's economy, particularly agriculture and dairy, have been protected," he said.

"We have seen reports from across the country; there is widespread enthusiasm. All those involved in India's exports, those connected to India's technology sector, those who want to bring modern technology to India or become part of global supply chains and global value chains, those who want to establish global capability centers, and those who want to invest in various sectors, especially labor-intensive ones that provide employment to millions of people - all are excited by this," he added.

- ANI