How the tariff rates compare with others:
Under the revised reciprocal tariff rate of 18 per cent (effective tariff rate of 16 per cent), Indian goods now face lower tariffs than competitors such as Bangladesh (35.1 per cent) , China (29.2 per cent), Vietnam (19 per cent) and other countries like Sri Lanka, Pakistan, and Indonesia (22.7 per cent), who previously enjoyed lower effective rates, the ratings firm said.
Sectoral impact:
Textiles: The tariff revision will likely benefit Indian textile players, particularly apparel and home textiles, as India’s effective tariff will be slightly better than other competing nations and will have advantage over China (29 per cent, largest exporter of textile to US) as well as Bangladesh (35 per cent).
The reduction in US tariff along with India’s trade deals with other key importing nations, namely the United Kingdom, European Union (EU), and United Arab Emirates (UAE) will provide tailwind to India’s textile exports.
Industry players will be required to take up incremental capex for meeting additional demand from recently concluded deals; however, US trade policy uncertainty may keep corporates cautious in investments, India Ratings said.
The US is the primary export market for the Indian textile industry, contributing around 29 per cent to all textile exports, followed by European Union at around 19 per cent. On the other hand, India accounts for around 9 per cent of all US textile imports, being the third-largest export market for the US, highlighting its importance as a key trade partner and provides scope to increase its share.
Chemicals: The US is India’s largest chemical export destination, accounting for 14 per cent of India’s chemical exports in first eight months of FY26. Organic chemicals accounted for around 40 per cent of India’s exports to the US while agrochemicals constituted another 20 per cent, including the exempt chemicals under the US executive order.
India Ratings said the higher tariffs on key competitor China will enhance the competitiveness of Indian chemical exporters, allowing them to increase their US market share. The tariff ceiling on the EU, another key competitor, is slightly lower, but production costs in the region are higher. Other key competitors exporting to the US include Canada and Mexico.
On the flip side, India’s growing domestic demand amid global overcapacity keeps it remains exposed to the risk of an influx of goods, especially from China, affecting realisations, it said.
Gems and Jewellery: India Ratings expects some relief for the cut and polished diamond (CPD) industry, which has been under pressure due to competition from lab-grown diamonds and sluggish demand from the US and China. India’s CPD exports to the US saw a sharp decline, however it was largely offset by exports to major diamond trading hubs such as Hong Kong, the UAE, Belgium, and Israel, apart from an increase in domestic sales. Lower tariffs and potential demand recovery are expected to support CPD players’ margins and alleviate working capital pressures,
Shrimp Industry: Indian processed shrimp industry will materially benefit from the India-US trade deal through better cost competitiveness against peers namely Ecuador, Vietnam, and Indonesia, helping improve US export demand and revenue visibility. The US is India’s most critical market for frozen shrimp, representing 41 per cent of the export volume and 48 per cent of the export value in FY25. US exports, which had witnessed steady growth pre-tariff imposition, significantly slowed down during August to November 2025, with recovery expected from the lower tariffs.
Overall impact:
“The India-US trade deal restores the relative competitiveness of Indian exports to the US from South-East Asian peers. The tariffs on China remain significantly higher. The potential for rerouting exports to markets such as India and competing with Indian exports in the global market, which is likely to slow down in 2026, however could limit the benefits in the short term. Stability in US tariff policies across markets would be key to restoring confidence in investments”, says Rakesh Valecha, Senior Director, Core Analytical Group.
