NEW DELHI / WASHINGTON — The global trade landscape has been reshaped following the February 2, 2026, announcement of a comprehensive trade deal between President Donald Trump and Prime Minister Narendra Modi. By slashing the effective tariff on most Indian goods from a punitive 50% down to 18%, the deal ends a year of escalating “reciprocal” trade wars and positions India as a primary alternative to China in the US supply chain.
1. The “Big Win” Sectors: Labour-Intensive & Export-Heavy
Industry bodies report that sectors with thin margins and high US exposure are seeing an immediate revival.
- Textiles and Apparel: The “biggest winner,” accounting for $11 billion in annual exports. With tariffs dropping from 50% to 18%, India now undercuts regional rivals like Vietnam (20%) and Bangladesh (20%).
- Solar Energy: Industry leaders, including Saatvik Green Energy, describe this as a “strategic turning point.” The removal of punitive levies significantly lowers the cost of Indian-made solar cells and modules for US developers.
- Gems & Jewellery: Centers in Surat and Mumbai, which faced a 50% turnover decline during the tariff spike, expect a sharp recovery in studded and diamond jewellery orders.
- Leather & Footwear: This MSME-dominated sector is expected to regain its pricing edge against Southeast Asian suppliers, supporting millions of domestic jobs.
2. Agriculture & Dairy: The “Safe” Zones
Commerce Minister Piyush Goyal clarified on Tuesday that India’s most sensitive livelihoods remain shielded.
- Exclusions: Dairy products, poultry, cereals (rice/wheat), and genetically modified (GM) foods have been excluded from the tariff-cut framework.
- Limited Access: US exports of “non-sensitive” items like tree nuts (almonds/walnuts), apples, and high-end wines will see reduced tariffs, potentially reaching zero over time.
- Minister’s Quote: “PM Modi has ensured that the interests of our small farmers and cooperatives are never compromised. Agriculture and dairy are fully protected.”
3. Strategic Industrial Gains
The deal integrates India further into high-tech global value chains (GVCs).
- Machinery & Aircraft Parts: Lower entry barriers are expected to facilitate India’s emergence as an aerospace manufacturing hub.
- Chemicals & Plastics: Organic chemicals and rubber goods see immediate duty relief, improving landed-price competitiveness in the US retail and industrial markets.
- Data Centers: US tech giants like Google and Microsoft are expected to benefit from tax holidays (per Budget 2026-27) for setting up data infrastructure in India.
4. Summary of the Trade Balance
| Category | Pre-Deal Tariff | New Tariff (2026) | Impact Status |
| Most Indian Goods | ~50% (incl. 25% penalty) | 18% | Massive Gain |
| Textiles/Apparel | 50% | 18% | Market Leader |
| Pharmaceuticals | 0-5% | Exempt | Stable |
| Steel & Aluminium | 25-50% (Sec 232) | Unchanged | Sensitive |
| Dairy/Poultry | Protected | Protected | No Change |