With a tariff rate of 26%, as of July 2025, which might reduce to below 20% amid speculations of a trade deal with the US, India is positioned to leverage its trade potential, particularly in sectors such as chemicals, electrical machinery, pharmaceuticals, textiles and agricultural goods, says GlobalData, a leading data and analytics company.

Ramnivas Mundada, Director of Economic Research and Companies at GlobalData, comments: “India’s tariff rate is relatively lower than other countries, including China (30%), Mexico (30%), and the EU (30%).

“This favorable environment not only presents a unique opportunity for Indian exporters to but also enhances the price competitiveness of Indian goods and encourages foreign investment, fostering innovation and growth. Against this backdrop, GlobalData forecasts an average growth rate of 6.5% from 2025 to 2027, positioning India to become the third-largest economy by 2027.”

According to NITI Aayog, India can capitalise on 78 product categories (HS 4 codes) for exports to the US, accounting for 52% of its current exports. In the HS 2 code category, India enjoys lower tariffs than competitors in 22 of the top 30 products.

This advantage arises from significant tariff hikes on goods from China, Canada, and Mexico. Although India faces slightly higher tariffs in six product categories, there remains a substantial growth potential, particularly in sectors like pharmaceuticals, textiles, and electrical machinery, enhancing India’s export competitiveness.

Data from the Ministry of Commerce and Industry reveals that India’s exports to the US increased by 23.5% in June 2025 and by 22.2% from April to June 2025 compared to the same period last year. This growth has positioned the US as India’s largest trading partner for the quarter.

Sector-wise opportunities

India has a notable comparative advantage in the chemicals and pharmaceuticals sectors. With China facing increased tariffs, Indian exporters have a prime opportunity to capture the US chemical import market.

India accounted for about 5% of the US apparel and clothing accessories imports in 2024, according to the ITC Trade Map. With new tariffs affecting Bangladesh, Cambodia, and Indonesia, Indian manufacturers have a significant opportunity.

To achieve this, improvements in cost efficiency, lead times, and support for large-scale textile manufacturers will be essential.

The tariff hikes on Asian countries create an opportunity for India to boost its agricultural exports to the US. With relatively lower tariffs, India can position itself as a viable alternative supplier of a range of products, including agricultural goods, livestock, processed foods, and scrap materials.

Companies shifting operations to India

In the first half of 2025, several multinational companies have begun shifting their manufacturing bases to India to capitalize on tariff advantages and reduce reliance on China.

Notably, Apple rerouted 97% of Foxconn’s Indian iPhone exports to the US during March to May 2025, up from 50.3% in 2024, reflecting a strategic pivot amid US-China trade tensions. Similarly, in July 2025, Samsung Electronics announced plans to diversify smartphone production by moving some manufacturing from Vietnam to India.

India’s trade competitiveness

To capitalize on the evolving trade dynamics, India must extend Production-Linked Incentive schemes to labor-intensive sectors like leather and handicrafts, while rationalising electricity tariffs to enhance competitiveness.

Additionally, pursuing a services-centric trade agreement with the US is essential, focusing on IT, finance, and digital trade. Addressing non-tariff barriers in sectors like pharmaceuticals is also crucial for unlocking export potential.

In June 2025, India urged the WTO to address non-tariff barriers impacting its merchandise exports, highlighting issues like opaque regulations and delays in dispute resolution that hinder competitiveness for Indian exporters, particularly MSMEs.

Mundada concludes: “Even if India’s anticipated trade deal with the US falls short of expectations, the broader shifts in global tariffs present a strategic opportunity for India to reposition itself as a key export partner. With its resilience and sectoral strengths, India is well-equipped to diversify its export base. By implementing supportive trade and industrial policies, India can transform global tariff challenges into significant economic advantages. As the world navigates these changing trade landscapes, India’s potential as a competitive exporter remains bright, promising growth and resilience in the face of adversity.”