India–US Trade Deal: Transforming Trade and Economic Growth

Trump-era US tariffs reshaped India’s key sectors, spurred trade diversification, and a future India–US trade deal could boost exports and investment.

Steel and Aluminum Industry in India

The imposition of 25% tariffs on steel and 10% on aluminum imports by the U.S. directly affected Indian exporters.

Key impacts:

• Reduced competitiveness of Indian steel and aluminum in the U.S. market.
• Excess supply in the domestic market leading to price pressures.
• Greater export focus on ASEAN countries, Africa, and the Middle East.
• India’s challenge to the tariffs at the WTO highlighted growing global trade friction.

Over time, Indian producers improved efficiency and reduced overdependence on a single export destination.

Textile and Apparel Sector: Opportunities from Supply Chain Shifts

The Indian textile and apparel industry experienced mixed outcomes from the U.S.–China trade war.

Key developments:

• Higher tariffs on Chinese textiles created opportunities for Indian exporters.
• U.S. buyers increasingly adopted a “China-plus-one” sourcing strategy.
• Withdrawal of GSP benefits reduced India’s tariff advantage in some categories.

Despite challenges, the sector showcased India’s potential to emerge as a global textile sourcing hub.

Pharmaceutical and Healthcare Exports

India’s pharmaceutical sector remained relatively insulated from direct tariff impacts.

Key highlights:

• Continued growth in generic drug exports to the U.S.
• Strengthened confidence in India’s pharmaceutical manufacturing capabilities.
• Greater emphasis on regulatory compliance and higher-value formulations.

The sector reinforced India’s position as the “pharmacy of the world.”

IT Services and Digital Trade

Since tariffs focused largely on goods, India’s IT and software services sector was not directly affected.

Indirect impacts included:

• Temporary slowdown in U.S. client spending amid trade uncertainty.
• Increased focus on remote delivery, cloud computing, and digital transformation.
• Expansion into European, Asia-Pacific, and Middle Eastern markets.

Indian IT firms responded by diversifying both services and geographic exposure.

Engineering Goods, Auto Components, and Manufacturing

Global supply chain disruptions prompted companies to reassess manufacturing strategies.

Key impacts:

• Rising interest in India as an alternative manufacturing and sourcing base.
• Growth in sectors such as electronics, auto components, and industrial machinery.
• Strong alignment with government initiatives like Make in India and the Production-Linked Incentive (PLI) scheme.

Trump-era tariffs indirectly accelerated India’s manufacturing ambitions.

Agriculture and Marine Exports

Indian agricultural and marine exporters faced increased competition in global markets.

Key challenges and responses:

• Price volatility in shrimp, rice, cotton, and spices.
• U.S. agricultural exports being redirected to third-country markets.
• Greater focus on value-added, branded, and processed food exports.

India’s Market Diversification Strategy: Opening New Trade Deals

One of the most significant outcomes of Trump-era tariffs was India’s accelerated push to diversify its trade relationships beyond traditional markets such as the United States and China. The uncertainty created by protectionist trade policies highlighted the risks of overdependence on a limited number of export destinations and encouraged India to adopt a more balanced and resilient trade strategy.

Key developments included:

• Renewed and intensified trade negotiations with major economies such as the European Union, the United Kingdom, Australia, and the United Arab Emirates, aimed at securing long-term market access.
• Signing of Comprehensive Economic Partnership Agreements (CEPA) and free trade agreements to reduce tariffs, enhance ease of doing business, and attract foreign investment.
• Expansion of Indian exports into Africa, Latin America, and Southeast Asia, particularly in pharmaceuticals, engineering goods, textiles, and agricultural products.
• Strategic alignment with multinational corporations seeking to diversify supply chains away from China, positioning India as a reliable manufacturing and sourcing alternative.

This proactive market diversification reduced India’s vulnerability to unilateral trade actions, strengthened export resilience, and improved integration into global value chains.

The Game-Changer Potential of an India–US Trade Deal

A comprehensive India–US trade agreement, if concluded, could significantly reshape India’s export growth trajectory.

Potential benefits include:

• Restoration of preferential market access for Indian goods.
• Greater certainty for exporters and global investors.
• Enhanced cooperation in manufacturing, digital trade, and supply chains.
• Strengthening of strategic and economic ties between the two democracies.

Such a deal would allow India to fully capitalize on global supply chain realignment trends.

Conclusion

Trump-era tariffs pushed India to reassess its trade strategy and reduce overdependence on limited markets. While some sectors faced short-term challenges, the disruption accelerated market diversification, supply chain realignment, and domestic manufacturing growth. India emerged as a stronger alternative in global supply chains.

A future India–US trade deal could be a game changer by restoring market access, boosting exports, attracting investment, and deepening strategic ties. Overall, the tariff period highlighted that adaptability and diversification are key to India’s long-term trade and economic resilience.

Written by Badri | MoneyScope360
360° of Money, Markets & Motivation