India-US Trade Deal: Zero Duty on Gems, Pharma Exports

A New Chapter in India-US Trade Relations

In a significant development for bilateral trade, Union Minister for Commerce and Industry, Piyush Goyal, announced on February 7, 2026, a new framework for an India-US trade agreement. The deal brings substantial relief to Indian exporters by implementing zero import duties on several key products entering the United States market, including gems, diamonds, pharmaceuticals, and smartphones. This move is expected to enhance the competitiveness of Indian goods and strengthen economic ties between the two nations.

Key Provisions of the Trade Agreement

Under the terms of the interim agreement, a wide range of Indian products will now enjoy duty-free access to the US. Minister Goyal highlighted that gems and diamonds, a cornerstone of India's export basket, will be completely exempt from import duties. Similarly, pharmaceutical products and smartphones, which are exported in large volumes, will also benefit from the zero-duty provision. The agricultural sector also received a boost, with zero reciprocal tariffs on items such as spices, tea, coffee, coconut products, and various nuts and vegetables. This is anticipated to provide direct benefits to farmers and the agro-processing industry, strengthening the rural economy.

Understanding the Reciprocal Tariffs

While the agreement eliminates tariffs on many goods, it is not a completely duty-free arrangement. The United States will apply a reciprocal tariff of 18% on certain goods originating from India. The categories subject to this tariff include textiles and apparel, leather and footwear, plastic and rubber products, organic chemicals, home decor, artisanal products, and some types of machinery. However, this 18% rate marks a significant reduction from the steep tariffs imposed in the previous year, offering a more predictable and favorable trade environment for these sectors.

Context: Reversing the 2025 Trade Disruptions

The new framework comes as a major relief after a challenging period in 2025 when reciprocal US tariffs severely disrupted trade flows. During that time, duties on polished diamonds and coloured gemstones surged from zero to 10% in April and escalated to an unviable 50% by August. Similarly, tariffs on jewellery jumped from a range of 5-7% to as high as 55-57%. This tariff escalation strained the working capital, liquidity, and margins of Indian exporters, leading to a sharp decline in trade volumes.

The Economic Impact of High Tariffs

The consequences of the 2025 tariffs were stark. According to data from the Gem and Jewellery Export Promotion Council (GJEPC), India's overall gem and jewellery exports to the US plunged by 44% between April and December 2025, falling from $1.6 billion to $1.8 billion. The impact was particularly severe for specific categories. Exports of cut and polished diamonds fell by over 60%, while studded gold jewellery shipments declined by 24%. The new agreement is poised to reverse this negative trend and stabilize operations for thousands of businesses.

Tariff Comparison: Before and After the Agreement

To understand the scale of the relief, a comparison of tariff rates is essential.

Industry Welcomes the Move

The Indian gems and jewellery industry has overwhelmingly welcomed the agreement. Kirit Bhansali, Chairman of the GJEPC, described the deal as a landmark development that provides much-needed relief. He expressed optimism that the tariff cuts would lower costs for US importers, boost the competitiveness of Indian diamond jewellery, and revive demand. Other industry leaders noted that the agreement would particularly benefit small and medium enterprises (SMEs), which form the backbone of the sector. The lab-grown diamond ecosystem, which has seen growing demand among younger US consumers, is also expected to benefit from the improved tariff economics.

Future Outlook and Broader Implications

This interim agreement sets a positive tone for future negotiations and deeper supply-chain integration between India and the US. By reducing trade barriers, the deal is expected to create new employment opportunities and stimulate investment in manufacturing, technology, and design. It aligns with the industry's long-term goal, as outlined in a joint study by the Exim Bank and GJEPC, to propel India’s gem and jewellery exports to $15 billion by 2030. The successful implementation of this framework is a crucial step toward achieving a more balanced, reciprocal, and mutually beneficial trade relationship.