The India-US trade deal that jeopardized the bilateral relations between world’s two largest democracies has finally been sealed after months of tariff threats, steep deadlines and pressure from Washington. The agreement, announced by US President Donald Trump on social media last week following a call with Prime Minister Narendra Modi, marks the end of series of closed-door negotiations and tensions that has surged following a 50% tariff by the US on India.
Key highlights of the deal
Following the deal, the US has slashed the tariff on Indian goods to 18%, down from a staggering peak of 50%. Union Commerce Minister Piyush Goyal termed this deal as historic and mentioned that this interim agreement would “open a $30 trillion market for Indian exporters, especially MSMEs, farmers and fishermen,” adding that the US would “slash reciprocal tariffs on Indian goods to 18%, providing a huge market opportunity in key sectors such as textiles and apparel, leather and footwear, plastic and rubber products.”
Presently, the US has imposed 50% tariffs on Brazil, 37% on China while South Africa faces a 30% tariff. Similarly in Asia, Bangladesh and Vietnam face tariffs of 20% while Malaysia, Cambodia and Thailand are at 19% each.
Advantage India?
With an 18% tariff rate, it is believed that India will have a competitive advantage over its regional partners in labour intensive markets such as Vietnam, Bangladesh, Thailand, Pakistan and Indonesia. This will benefit ‘Make in India’ push, feel market analysts.
The framework also addresses tariffs linked to US national security rules. Certain Section 232 tariffs on Indian aircraft and aircraft parts related to steel, aluminium, and copper will also be removed. India will receive a preferential tariff-rate quota for auto parts.
How will it impact Odisha and its economy
The interim deal promises expanded access to the US, considered as the largest consumer market. However, its real impact will be dependent on how it transforms livelihoods, especially for the thousands of MSMEs in Odisha, considered as the backbone of the state’s economy. Here’s how…
Open gates for exports
The lowering of tariffs from 50% to 18% will enable Odisha’s textiles, handloom, handicrafts, and seafood processors to make a new avenue to expand their market beyond the country, making it more competitive, qualitative and visible in the US market.
If reports are to go by, India’s textile and apparel exports to the US were nearly $10–11 billion in FY25, about 28 % of India’s total textile exports. Therefore, it also opens new avenues for Odisha producers aiming at exports.
Similarly, in terms of marine and seafood processers, Odisha can play a significant role by improving price competitiveness against countries like Vietnam and Thailand, thanks to lower tariff, potentially increasing demand.
Moreover, Better integration into global value chains could attract investment, training programmes, and export facilitation schemes from both state and central governments.
Boost to investment
The deal will open doors for Foreign Direct Investment (FDI), especially in sectors that the US plans to invest in manufacturing. That means Odisha can become a market for textiles and technology, which in turn could lead to setting up of new factories, job creation and development of industries.
Cheaper goods
With lesser import duties on items like dry fruits, wine, motorcycles such as Harley Davidson, Odisha’s local consumers could reap on the benefit as these items may get cheaper.
No wonder, markets in Odisha have given thumbs up to this deal. Hailing this agreement as a game changer, Odisha Chief Minister Mohan Charan Majhi has stated that “it will position Odisha as a key player in the global semiconductor supply chain and boost the state’s traditional industries.” Taking it to his X handle, Majhi said “from Odisha’s handloom or modern readymade garments, our craftsmanship will now reach everywhere. Due to the easing of duties, exports will become easier, which will open new avenues of employment for our weavers and handloom artisans. Odisha’s traditional attire will now create a new trend in the global market.”
Having said that, it will depend on the execution not to miss out quality, financing, export readiness, and integration into international supply chains.
The trade deal is expected to unlock new avenues for Odisha’s growth, connecting its mineral resources with global tech giants and showcasing its rich cultural heritage to the world.
Sector-specific benefits will accrue to textiles, leather, gems and jewellery, pharmaceuticals, machinery, automobiles etc. Several labour-intensive sectors will stand to gain from the trade deal:
- Leather and footwear
- Textiles and apparel
- Plastic and rubber
- Home decor
- Organic chemicals
- Artisanal products
- Certain machinery
On several products the tariffs will go down to zero, such as gems and diamonds, aircraft parts, generic pharmaceuticals. This will benefit India’s ‘Make in India’ push.
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