The Union Budget for 2025-26 introduced significant customs duty reductions, anticipated to bolster American exports across multiple sectors. The Global Trade Research Initiative (GTRI) has highlighted how these changes could reshape the trade dynamics between India and the United States.

General Impact

The customs duty cuts are set to benefit American exports, addressing past criticisms of India’s tariff practices. These reforms are expected to enhance market access and strengthen bilateral trade ties.

Key Tariff Reductions and Their Impact

Product Category	Previous Tariff (%)	Revised Tariff (%)	US Export Value (FY24/FY23)
Motorcycles (<1,600cc)	50	40	$3 million
Motorcycles (>1,600cc)	50	30	$3 million
Carrier-grade Ethernet Switches	20	10	$653.4 million
Synthetic Flavoring Essences	100	20	$21 million
Fish Hydrolysate	15	5	$35 million
Satellite Ground Installations	Variable	0	$92 million
Waste and Scrap Items	5	0	$2.5 billion

Sector-wise Analysis

1. Motorcycle Tariffs
   • The reduction from 50% to 40% for motorcycles under 1,600cc and to 30% for those above 1,600cc will likely boost US motorcycle exports to India, which stood at $3 million in FY24.
2. Telecommunications Equipment
   • The tariff on carrier-grade ethernet switches has been halved to 10%, potentially increasing US exports, which were valued at $653.4 million last fiscal year.
3. Food and Flavoring Industry
   • A significant cut in tariffs on synthetic flavoring essences from 100% to 20% can expand the US market share in India, with current exports at $21 million.
4. Agricultural Inputs
   • The duty reduction on fish hydrolysate from 15% to 5% benefits US exporters, with $35 million in exports in 2023-24.
5. Space Sector
   • Eliminating tariffs on satellite ground installations and related consumables could rejuvenate US exports in this segment, valued at $92 million in FY23.
6. Waste and Scrap
   • The removal of duties on certain waste and scrap items supports substantial US exports, which reached $2.5 billion in 2023-24.

Bilateral Trade Overview

India and the US maintain a robust trade relationship:

Period	Bilateral Trade Value (USD Billion)
April-November 2024-25	82.52

The US remains India’s second-largest trading partner, underscoring the significance of these tariff reforms in strengthening economic ties.

Conclusion

The customs duty reductions in India’s 2025-26 budget mark a pivotal shift in trade policy, fostering greater accessibility for American exports. These changes are poised to enhance the competitiveness of US products in the Indian market, contributing to a more balanced and dynamic trade relationship.