Editor’s Note
This analysis highlights how a potential India-U.S. trade deal could maintain favorable tariff conditions for key Indian exports, particularly electronics. The findings underscore the strategic importance of current trade structures in sustaining export competitiveness.
New Delhi. The proposed trade deal between India and the United States is expected to keep the effective tariff rate on Indian exports low, at around 12-13 percent. This revelation comes from a recent report by Bank of America Global Research, provided that the mutual tariff remains at 18 percent.
According to the report, electronics account for 40-45 percent of Indian exports to the US, which are already benefiting from zero tariffs. Even with the addition of Section 232 duties, the effective rate will only be slightly above 12 percent. This will provide exporters with a strong competitive edge.
However, tariffs of 25 percent under Section 232 on automobiles, parts, iron, steel, and aluminum may remain, as there is no clarity on this in the first phase. Exporters in these sectors will need to remain cautious.
Labor-intensive sectors such as textiles and gems & jewelry are set to gain special benefits. India’s import target from the US of $500 billion over five years, equivalent to $100 billion annually, can be easily achieved given that the US share in India’s total imports of $750 billion is a mere 6 percent.
Shifting energy purchases from Russia to the US will have a negligible impact on the current account. An increase in services exports could lead to a surplus position by December 2025. This deal is poised to elevate the economic relations between the two countries to new heights.