India stands to gain a significant edge in the US export market as new American tariffs hit key trading partners like China, Mexico and Canada, according to a recent Trade Watch Quarterly report by NITI Aayog. The think tank highlights that sectors such as pharmaceuticals, textiles, and electronics are especially well-positioned to benefit from these shifting trade dynamics.
The report states that India is expected to gain a competitive advantage in 22 of the top 30 product categories at the HS-2 level, representing a market worth over $2.28 trillion. These gains stem from steep tariffs introduced by the Trump administration—30% on Chinese goods, 35% on Canadian products, and 25% on imports from Mexico—making Indian goods more attractive and cost-competitive in the US.
NITI Aayog emphasized that India’s relative tariff advantage presents a “strategic window” for expanding its market share in the US. However, seizing this opportunity will require quick and strategic policy action.
India’s current competitive position remains unchanged in six of the top 30 HS-2 product categories, which together account for nearly 33% of its exports to the US and 26% of total US imports—equivalent to $26.5 billion. Yet, the greater opportunity lies in 78 product categories that represent over half (52%) of India’s exports to the US and about a quarter of US imports. These include sectors such as minerals and fuels, apparel, electronics, plastics, furniture, and seafood—covering a market valued at $1.26 trillion.
Still, India faces some challenges. In six product categories, Indian exports are subject to marginally higher tariffs (1–3%) compared to competitors, which the report says could be addressed through negotiations. Additionally, in 17 of the top 100 products at the HS-4 level—covering 28% of India’s exports to the US—India’s competitiveness remains unchanged due to a lack of tariff differential.
To enhance export competitiveness, NITI Aayog recommends extending production-linked incentive (PLI) schemes to more labour-intensive industries such as leather, footwear, furniture, and handicrafts. It also calls for rationalizing industrial electricity tariffs—especially by reducing cross-subsidies and expanding the use of renewable energy—to cut manufacturing costs.
On the trade policy front, the think tank suggests that India pursue a services-focused trade deal with the US, modeled after its agreement with the UK. This should include strong digital trade provisions and support cross-border services in IT, financial services, education, and professional services.
Meanwhile, an Indian commerce ministry delegation has arrived in Washington for renewed negotiations on a proposed bilateral trade agreement (BTA). Talks resumed on July 8, aiming for an interim agreement by the fall and a broader deal in the coming months. The urgency is heightened as the US has extended its deadline for imposing additional tariffs—including on India—until August 1.
Key sticking points in the negotiations include US demands for reduced tariffs on agricultural products, dairy, EVs, and industrial goods. India has resisted such concessions, especially in agriculture and dairy, consistent with its past free trade agreements. At the same time, India is pressing for a rollback of high US tariffs on Indian steel (50%), aluminium (50%), and automobiles (25%).
Under WTO rules, India has reserved the right to impose retaliatory tariffs if needed. The US’s wider tariff actions—announced on April 2 and twice deferred—have also impacted countries like Japan, South Korea, Malaysia, Thailand, Indonesia, and South Africa.
India is pushing for US concessions on exports that are critical to its domestic economy—such as textiles, garments, gems and jewellery, chemicals, shrimp, plastics, leather goods, oil seeds, grapes, and bananas.
If the trade talks result in a breakthrough, it could reset the trajectory of the Indo-US trade relationship and position India as a key alternative supplier to American markets amid shifting global trade alignments.
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