45% of Indian Exports to US Exempt from New 10% Tariff

NEW DELHI — Nearly 45% of India’s exports to the United States will remain exempt from the newly imposed 10% additional tariff under the US Section 301 measures, the Ministry of Commerce and Industry announced on Saturday. This outcome follows months of sustained engagement between Indian officials and the Office of the United States Trade Representative (USTR) regarding policies on forced labour.

The final measures, announced by the USTR on July 23, 2026, place India in a "lower tier" of additional tariffs. The move represents a diplomatic success for New Delhi, as the US had initially proposed a 12.5% duty on Indian imports in early June. While the remaining 55% of Indian exports will face the 10% ad valorem duty, the government emphasized that India’s overall tariff burden remains comparatively lower than that faced by many other economies caught in the same investigation.

Scope of Tariff Exemptions

The 45% of Indian exports shielded from the new duty includes several high-value sectors that are currently subject to zero additional tariffs. Key categories remaining outside the scope of the 10% levy include:

• Generic Pharmaceuticals: A critical segment of India’s healthcare exports.

• Smartphones: A major contributor to India's burgeoning electronics manufacturing sector.

• Section 232 Products: Goods already covered by separate national security trade measures—such as steel, aluminium, and specific auto parts—are exempt from this new Section 301 tariff, as they are governed by existing, distinct duty structures.

"A substantial share of India's exports to the United States... continue to remain outside the scope of the additional 10% duty," the Ministry of Commerce and Industry stated.

Diplomatic Engagement and Trade Talks

The reduction from the originally proposed 12.5% to 10% is being attributed to New Delhi’s proactive stance during the investigation. Indian officials participated in extensive written submissions, in-person consultations, and public hearings to clarify India's domestic policies regarding the prohibition of goods produced using forced labour.

Despite the current tariff adjustments, India and the US are continuing negotiations on a broader Bilateral Trade Agreement (BTA). The government noted that a specific textile-related mechanism mentioned in the final US measures has yet to be operationalized. India continues to engage with Washington to refine these terms as part of the ongoing BTA discussions, reaffirming its commitment to an early conclusion of the agreement.

Impact on Exporters

While the government has highlighted the relative advantage India holds compared to other nations, the industry remains cautious. The Gem and Jewellery Export Promotion Council (GJEPC) has noted that while India’s tariff rate is lower than some competitors, the 10% duty on items like polished diamonds and jewellery poses a competitive challenge, particularly as exporters from regions like the European Union continue to enjoy duty-free access for certain natural stones.

Official Sources

Information regarding the final tariff structure was confirmed by the Ministry of Commerce and Industry and the Office of the United States Trade Representative (USTR).

Why It Matters

For Indian exporters, the 10% tariff cap provides a degree of stability and a relative competitive advantage over other economies facing higher penalties. The exemption of nearly half of India's total export volume to the US helps maintain the competitiveness of essential sectors like pharmaceuticals and technology hardware, which are central to India’s export growth strategy.

Key Facts at a Glance

• Tariff Rate: 10% (reduced from the proposed 12.5%).

• Exemption Rate: 45% of Indian exports to the US remain exempt.

• Affected Sectors: 55% of exports will face the additional 10% duty.

• Status of Section 232 Goods: Steel, aluminium, and auto parts remain exempt from the new Section 301 duty as they are already subject to separate levies.

• Next Steps: Ongoing negotiations for an India-US Bilateral Trade Agreement (BTA).

FAQ

Why did the US impose these tariffs? The tariffs were imposed following a Section 301 investigation into the policies and practices of 60 economies regarding the import of goods produced using forced labour.

Are all Indian goods subject to the new 10% tariff? No. Approximately 45% of India's exports, including smartphones and generic pharmaceuticals, remain exempt. Additionally, items like steel and aluminium already covered under Section 232 measures are also excluded.

How does India's tariff compare to other countries? India has been placed in the "lower tier" of the tariff structure, receiving a lower rate than many other nations investigated by the USTR.

What is the status of the India-US Bilateral Trade Agreement? Talks are ongoing, and the Indian government remains committed to an early conclusion of the BTA.

Source: Ministry of Commerce and Industry (Government of India), Office of the United States Trade Representative (USTR), The Hindu