US-India Trade Deal: Tariffs Slashed to 18%, Boosting Indian Exports and Stock Market Sentiment

The US slashed tariffs on Indian goods from higher levels (up to 50% in some cases) to 18%, as part of a trade deal.

In a significant development for bilateral ties, the United States and India have announced a landmark trade agreement that immediately reduces US tariffs on Indian goods from as high as 50% (including punitive measures) to 18%. The deal, confirmed by US President Donald Trump and Prime Minister Narendra Modi following a phone call, marks a major relief for Indian exporters and is expected to provide a strong tailwind to several key sectors in the Indian stock market.

President Trump announced the agreement on his social media platform, Truth Social, stating: "Out of friendship and respect for Prime Minister Modi and, as per his request, effective immediately, we agreed to a Trade Deal between the United States and India, whereby the United States will charge a reduced Reciprocal Tariff, lowering it from 25% to 18%." He added that India has committed to halting purchases of Russian oil, increasing buys from the US (and potentially Venezuela), and reducing its own tariff and non-tariff barriers against American goods.

Prime Minister Modi welcomed the move, posting: "Delighted that Made in India products will now have a reduced tariff of 18%. Big thanks to President Trump on behalf of the 1.4 billion people of India for this wonderful announcement."

The tariff cut comes just days after India's Union Budget 2026-27, presented by Finance Minister Nirmala Sitharaman on February 1, introduced customs duty rationalizations on raw materials, capital goods, and inputs for sectors like clean energy, electronics, and exports. While the Finance Minister clarified that budget measures were not directly influenced by US negotiations, the timing amplifies positive momentum for domestic manufacturing and export competitiveness.

Key Sectors Set to Gain the Most

The combined impact of the US tariff relief and budget incentives positions several export-oriented and manufacturing sectors for strong gains:

1. Textiles and Apparel

• Benefits: Significant relief from US tariffs, as the US accounts for ~28% of India's textile exports. Lower duties improve price competitiveness against rivals like Bangladesh and Vietnam, boosting orders and margins. The Indian budget also supports modernization and input availability in textile clusters.

• Example Stocks: Welspun India, Trident, Gokaldas Exports, KPR Mill.

  
  

2. Seafood and Marine Products

• Benefits: US tariff cuts directly aid exporters, especially shrimp, by reducing costs and enhancing market access. The budget provides policy support and duty exemptions for seafood processing.

• Example Stocks: Avanti Feeds, Apex Frozen Foods.

  
  

3. Auto Ancillaries and Engineering Goods

• Benefits: Lower US tariffs on engineering and auto components reduce export burdens, improving viability for North American supplies. The budget cuts duties on EV batteries and aircraft parts, aiding domestic production.

• Example Stocks: Tata Motors, Bharat Forge, Sona BLW, SAMIL (Shriram Automall India), Balkrishna Industries.

  
  

4. Chemicals (Especially Speciality Chemicals)

• Benefits: US trade deal enhances export competitiveness in intermediates and speciality chemicals. Budget reductions on raw materials and critical minerals lower input costs for manufacturing.

• Example Stocks: Companies like SRF, PI Industries, or those in speciality segments (specific names vary by exposure).

  
  

5. Gems and Jewellery

• Benefits: Tariff relief from the US boosts exports of diamonds, wigs, and related items, where duties had pressured margins.

• Example Stocks: Titan Company (jewellery segment), Rajesh Exports.

  
  

6. Electronics and Semiconductors

• Benefits: Budget cuts duties on components like PCBA, connectors, and battery covers to promote local assembly under Semiconductor Mission 2.0. This reduces costs for manufacturers.

• Example Stocks: Dixon Technologies, Amber Enterprises.

  
  

7. Clean Energy and Critical Minerals

• Benefits: Duty reductions on lithium-ion cells, solar glass, and critical minerals support EV and renewable energy production, aligning with energy transition goals.

• Example Stocks: Tata Power (renewables), Exide Industries (batteries).

  
  

8. Leather Goods and Footwear

• Benefits: Budget and trade deal support through duty concessions on raw materials, aiding exports amid tariff vulnerabilities.

• Example Stocks: Relaxo Footwears, Bata India.

  
  

9. Biopharma and Medical Devices

• Benefits: Budget exemptions on cancer medicines and biopharma inputs lower costs; aligns with US strengths but boosts domestic players.

• Example Stocks: Sun Pharma, Dr. Reddy's Laboratories.

  
  

10. Aerospace and Defense

• Benefits: Cuts on aircraft parts and maintenance inputs support MRO (maintenance, repair, overhaul) activities.

• Example Stocks: Hindustan Aeronautics, Bharat Electronics.

Sector	Direct Benefit Type	Key Drivers	Potential Stock Impact
Textiles & Apparel	Export Competitiveness	US tariff cut to 18%	Higher margins, order visibility
Seafood	Export Cost Reduction	US trade deal	Improved profitability for US-exposed firms
Auto Ancillaries	Lower Export Duties	US & Budget relief	Enhanced North American supplies
Chemicals	Input Cost Savings	Budget raw material cuts	Better contracts in speciality segments
Gems & Jewellery	Margin Expansion	US tariff relief	Rebound in diamond/jewellery exports
Electronics	Assembly Cost Reduction	Budget component duties	Boost to local manufacturing
Clean Energy	Energy Transition Support	Critical minerals exemptions	EV/solar growth acceleration
Leather & Footwear	Raw Material Relief	Budget concessions	Export recovery
Biopharma	Healthcare Accessibility	Medicine exemptions	Lower costs for patients/producers
Aerospace	MRO Efficiency	Aircraft parts duties	Defense sector uplift

Market reactions have been swift, with gems and jewellery stocks leading early gains on February 3. Analysts expect broader rallies in export-heavy names as visibility improves.

Industry leaders and experts have hailed the deal as a win for both sides. It strengthens "Make in India" efforts, unlocks opportunities in agriculture and energy for US firms, and helps India navigate global trade uncertainties.

This agreement arrives amid ongoing geopolitical shifts and follows months of negotiations. While India commits to diversifying oil sources, the tariff reduction is seen as a strategic step to enhance bilateral trade volumes and economic resilience.

Investors should monitor market opening trends and corporate commentary for further cues. This deal could mark the beginning of deeper economic integration between the world's largest democracies.

(Disclaimer: This report is for informational purposes only and not investment advice. Markets can be volatile; consult a financial advisor.)

***US-India Trade Deal