US-India Trade Deal: 18% Tariff Regime Holds as India Commits to $500 Bn in US Imports Over 5 Years — What It Means for Indian Industry
The bilateral trade deal struck between India and the United States in February 2026 — under which US tariffs on Indian goods were slashed from 50% to 18% — continues to hold firm, with both sides expressing satisfaction with early implementation. India has committed to zero tariffs on US goods and $500 billion in US imports over the next five years as part of the landmark agreement.
Representative image. Photo: Nationalism News / PTI
The US-India trade deal, announced by President Donald Trump and Prime Minister Narendra Modi on February 2, 2026, has now been in effect for two months and is showing early positive results for both economies. Under the deal, the United States reduced tariffs on most Indian goods from 50% to 18%, ending a punishing tariff regime that had cost India an estimated 135,000 jobs in the gems and jewellery, seafood and manufacturing sectors in the preceding months.
India, in return, agreed to zero tariffs on US goods, committed to halt purchases of Russian oil, redirect procurement to US-aligned suppliers, and sign an unprecedented $500 billion import commitment over five years. The commitment covers US defence equipment, semiconductors, civil aviation products, LNG, and agricultural goods.
Trade economists at the Council on Foreign Relations have described the deal as "one of the most consequential bilateral trade agreements in recent history," noting that it effectively brings India into the US-aligned economic bloc at the expense of India's previous non-aligned stance on trade. Several opposition parties in India, including the Congress and Left parties, have criticised the deal for its one-sided nature, arguing that India's commitments to the US are far more binding than the tariff reduction it received in exchange.
For Indian industry, the reduced tariff regime has already produced measurable results. Pharma exports to the US — India's single largest export category — grew 14% year-on-year in March 2026, recovering from a 9% decline during the punishing 50% tariff period. Textile exports grew 11%, while IT services are not directly subject to goods tariffs but have benefited from the improved bilateral diplomatic climate.
The diamonds and gems sector in Surat, which saw the sharpest job losses during the tariff escalation period, is showing early signs of recovery. Industry body GJEPC reported that polished diamond exports to the US rose 22% in February 2026, with industry leaders cautiously optimistic about a full recovery by H2 FY27.
The deal's most controversial clause — India's commitment to halt Russian oil imports — has triggered a major geopolitical realignment in India's energy procurement strategy. India, which had built up significant Russian oil imports since the 2022 Ukraine war began, is now scrambling to find alternative suppliers from the UAE, Saudi Arabia, and the United States' own Gulf Coast producers.
Mexico's simultaneous imposition of tariffs on Indian goods — a double blow that hit India after the US tariff escalation in mid-2025 — has not yet been resolved by the bilateral deal, as the US-India arrangement does not cover third-country tariffs. Indian exporters are lobbying for a separate India-Mexico trade arrangement to address this remaining friction.