India’s trade agreement with the US underscores New Delhi’s effort to protect politically sensitive farm and dairy industries even as it opens wider export channels for manufacturing and labour intensive goods.

The framework maintains tariff safeguards for key agricultural segments including dairy products, cereals, poultry, wheat, rice, soybeans, ethanol and genetically modified food imports, reflecting domestic priorities tied to rural employment, food security and farmer incomes. The protective stance highlights India’s attempt to balance market liberalisation with social and economic stability.

During a press briefing India’s Minister of Commerce and Industry Piyush Goyal revealed that his team structured the deal in a way that will protect sensitive agricultural items and dairy sub sectors and that details of the deal will be made public in a short while.

Beyond the formal trade language, the agricultural safeguards reflect a calculated domestic policy choice. India’s farm economy remains deeply fragmented, dominated by small and marginal producers whose livelihoods are closely linked to price stability and market access.

A report by Hindustan Times indicates that moderately sensitive imports such as almonds, pistachios, cherries and hazelnuts will be governed through tariff rate quotas, allowing restricted entry while preventing sudden supply surges.

Selected edible oils and horticultural goods are expected to undergo phased tariff reductions over a three to ten year period, creating a transition window for Indian producers to enhance productivity, adopt improved technologies and gradually adapt to international competition.

While agricultural protections have been prioritised, the US continues to retain safeguard duties on metals including steel, aluminium and copper, as well as certain automobile components, under global trade rules. These restrictions remain outside the bilateral framework and apply uniformly across exporting countries.

The negotiating emphasis placed by India on shielding agriculture and allied rural supply chains highlights the political and economic centrality of farming communities, even as industrial exporters continue seeking wider tariff relief in global markets.

Parallel to these protections, the agreement opens substantial export opportunities across labour intensive sectors. The US has lowered effective import tariffs on Indian goods to 18% from earlier combined duties that reached 50%. This recalibration significantly improves cost competitiveness for exporters whose pricing had been eroded by earlier duty differentials.

India has also secured zero duty access for goods valued above $40bn, alongside potential duty free treatment for additional shipments estimated at nearly $10bn under existing US preferential trade mechanisms. Labour intensive industries are expected to register the earliest gains. Textile and apparel manufacturers, leather product exporters, marine product suppliers and jewellery makers are likely to recover market share in the US, where elevated tariffs had previously undermined their competitive position.

Additional sectors including plastics, rubber goods, carpets, home décor products, specialty chemicals and processed agricultural exports may also benefit from stronger US demand as buyers continue diversifying supply chains following earlier global disruptions. Micro, small and medium enterprises are expected to gain indirectly from this export expansion. MSMEs form the backbone of India’s manufacturing ecosystem, often operating as component suppliers and specialised production units for larger exporters. Rising overseas orders may support improved factory utilisation, strengthen credit flows and encourage incremental capital investment in machinery, digital systems and workforce skill development across regional industrial clusters.

According to a report by Capital Economics the agreement also strengthens India’s competitiveness relative to Southeast Asian manufacturing hubs such as Vietnam, Indonesia, Malaysia, Cambodia, Thailand and Bangladesh, where US import duties generally range between 19% and 20%. The revised tariff structure provides Indian exporters with a modest duty advantage of roughly one to two percentage points, potentially enhancing pricing flexibility and improving prospects for securing long term supply contracts across automotive and industrial machinery value chains.

Alongside export expansion, India has committed to increasing imports of US goods spanning aircraft, energy resources, agricultural commodities and advanced technology equipment. Procurement commitments are expected to exceed $500bn over five years, reflecting India’s growing requirements in aviation infrastructure, energy security and high technology manufacturing inputs.

Imports of US crude oil meanwhile, have already recorded strong growth, with official data indicating a 47.6% y/y increase in November 2025, pushing monthly import values above $1.9bn. Future imports are expected to extend into semiconductors, artificial intelligence technologies, data centre infrastructure and equipment supporting global capability centres.

Policymakers view these acquisitions as integral to strengthening India’s digital and industrial transformation. Imports of diamonds and other precious stones for domestic processing are also expected to increase, although gold imports are likely to remain under quota based tariff controls designed to manage trade balances and currency stability.

Another critical provision involves the removal of punitive tariffs previously linked to India’s energy sourcing patterns. The withdrawal of these duties reduces compliance complexity for exporters and restores greater predictability in cross border trade operations. Implementation is expected following the release of a joint bilateral statement and completion of technical and legal verification procedures.

Officials indicate that most provisions are likely to become operational soon after ratification, although certain components may follow defined implementation timelines.

Economists now expect the tariff recalibration to provide incremental support to India’s economic expansion by reviving exports across sectors that were disproportionately affected by earlier US duties. The Reserve Bank of India is thus closely monitoring export momentum and external balance indicators, as sustained trade recovery could reinforce currency stability and strengthen foreign exchange reserves.

Investors are simultaneously evaluating whether tariff certainty will encourage multinational corporations to scale manufacturing operations in India amid ongoing global supply chain realignment. Taken together, the agreement reflects India’s calibrated trade strategy that simultaneously safeguards vulnerable agricultural constituencies while strengthening its industrial export base.

Policymakers appear focused on pursuing controlled liberalisation that preserves domestic economic stability while enhancing integration into global production networks.