Why Manufacturers Should Pay Attention
The uncertainty surrounding the India–US trade relationship is once again putting Indian exporters on alert. Negotiations for a bilateral trade agreement have stalled, with disagreements over tariffs, market access, agricultural trade and India’s continued purchases of Russian oil complicating the path towards a final deal.
For manufacturers, this is more than a diplomatic development. The United States is a major destination for Indian goods, and uncertainty over import duties can influence the price at which Indian companies compete, the margins they retain and the confidence with which they accept long-term export orders.
According to Reuters reporting published on 6 October 2026, Indian exports to the US reached approximately $42.79 billion between April and August 2026. India also recorded a goods trade surplus of around $34 billion with the US in financial year 2025–26. These figures underline the commercial importance of a stable trade relationship.
Source: Reuters — Why have India–US trade talks stalled again?
Why Has the India–US Trade Deal Stalled?
Both countries have been working towards a bilateral trade agreement, but several difficult issues remain unresolved.
1. Tariffs and uncertainty over future duties
A framework announced earlier in 2026 had reduced the punitive tariff burden on many Indian goods compared with the earlier peak of 50%. However, the final trade agreement remains unresolved, and subsequent changes to the US tariff framework have added uncertainty.
A further complication is US legislation that could enable tariffs of up to 100% on Indian goods in connection with India’s purchases of Russian oil. This is a potential measure—not confirmation that a 100% tariff currently applies to all Indian exports.
For manufacturers, the immediate concern is the lack of certainty about the duties that may apply when a shipment reaches its destination.
2. Disagreements over market access
The negotiations also involve access to each country’s markets. Agriculture and other politically sensitive sectors remain difficult areas for India, while the US is seeking improved access for American products.
Any eventual agreement will need to balance export opportunities with domestic industry interests. The terms matter: a trade deal may improve access for some sectors while exposing others to stronger import competition.
3. The US investigation into industrial overcapacity
Washington is also examining concerns about excess industrial capacity and its impact on American industries through a separate Section 301 investigation.
For Indian manufacturers, the outcome matters because trade measures arising from such investigations can affect the competitive position of exporters. The precise implications will depend on the final findings, applicable product coverage and any measures adopted.
Which Indian Manufacturing Sectors Could Be Affected?
The impact will not be uniform across manufacturing. Exposure depends on the product, applicable tariff classification, existing duties, customer contracts and the extent to which US buyers can switch suppliers.
1. Auto components and engineering goods
Indian suppliers of machined components, castings, forgings, industrial equipment and engineered products may face pressure if tariffs increase their landed prices in the US.
A US buyer comparing suppliers from India, Mexico, Vietnam or other manufacturing hubs will consider the total cost of procurement—not just the factory-gate price.
What manufacturers should do: Calculate the landed cost of their major export products under multiple tariff scenarios. Identify which products remain competitive if duties rise and which depend on favourable tariff treatment.
2. Industrial machinery and capital equipment
Machinery manufacturers often work with longer sales cycles, technical evaluations and project-specific quotations. A sudden change in import costs can complicate negotiations that began months earlier.
Companies with open quotations or multi-quarter supply commitments should review the assumptions behind their pricing.
What manufacturers should do: Include clearly defined tariff-change provisions in new contracts where commercially and legally appropriate. For large orders, establish a process for reviewing quotations when trade rules change.
3. Metals and metal-intensive products
Steel, aluminium and products made from these materials can face distinct trade measures. Their exposure must be assessed separately rather than inferred from general tariff announcements.
Manufacturers should check the rules applicable to each product, including any sector-specific measures, exclusions and country-of-origin requirements.
What manufacturers should do: Ask the export team, customs broker or trade-compliance adviser to verify the applicable tariff classification and current duty treatment before quoting or shipping.
4. Textiles, apparel and other labour-intensive manufacturing
Textile and apparel exporters are sensitive to relatively small changes in landed cost because international buyers can compare production across several countries.
If tariff uncertainty persists, buyers may delay orders, request revised prices or diversify sourcing to reduce risk.
What manufacturers should do: Strengthen buyer relationships, improve delivery reliability and productivity, and identify alternative markets instead of competing on price alone.
Could Indian Manufacturers Gain Opportunities?
Yes—but opportunities are not automatic.
If buyers in the US seek to diversify sourcing, Indian suppliers with reliable quality, competitive costs and dependable delivery may benefit. However, competing exporters in other countries may also offer attractive alternatives.
The manufacturers best positioned to benefit are likely to be those that can demonstrate:
- Competitive landed cost: Pricing that remains attractive after duties, freight and insurance.
- Consistent quality: Reliable compliance with customer specifications and audit requirements.
- Delivery confidence: Predictable lead times and effective production planning.
- Supply-chain transparency: Clear information on material origin, traceability and regulatory compliance.
- Commercial flexibility: The ability to adapt product mix, sourcing and delivery schedules without undermining margins.
A trade agreement could improve predictability, but businesses should not build their entire export strategy around an agreement that has not been finalised.
What Should Indian Manufacturers Do Now?
Rather than waiting for a political announcement, manufacturing leaders can take five practical steps.
1. Map US revenue exposure
Calculate the share of revenue generated from US customers, product by product. Identify major customers, key export items and orders scheduled over the next six to twelve months.
2. Run tariff-sensitivity scenarios
Model at least three situations: current verified duties, a moderate increase and a severe increase. Calculate the effect on landed price, gross margin and order profitability.
Use product-specific tariff rates verified by a customs or trade-compliance professional. Do not apply a headline tariff figure indiscriminately to every product.
3. Review quotations and customer contracts
Identify quotations that may expire soon and contracts that lack a mechanism for dealing with changes in duties. Discuss cost-sharing or price-review mechanisms with customers where appropriate.
Any contractual changes should be reviewed by qualified legal and trade advisers.
4. Diversify customers and export markets
Reducing dependence on one country or a small number of buyers can make the business more resilient. Evaluate other export markets based on actual demand, regulatory requirements, logistics costs and the company’s ability to compete.
Diversification should be commercially viable—not simply a reaction to headlines.
5. Improve productivity and cost control
When tariff conditions are uncertain, operational efficiency becomes even more important. Manufacturers should review scrap rates, machine utilisation, energy consumption, inventory levels and on-time delivery.
Lower production costs cannot eliminate every tariff disadvantage, but they can create more room to compete on price while protecting margins.
What Should Manufacturing CEOs Watch Next?
The next important developments are not just announcements about whether a deal has been signed. Business leaders should monitor:
- Official tariff notifications: Which products are covered, when measures take effect and whether exemptions apply.
- Progress in bilateral negotiations: Whether the two governments resolve differences over market access and trade conditions.
- The outcome of the US industrial-overcapacity investigation: Whether it leads to additional measures affecting Indian products.
- Competitor-country treatment: Whether suppliers from competing manufacturing locations receive more favourable terms.
- Actual buyer behaviour: Whether US customers are changing order volumes, requesting price reductions or shifting sourcing.
These signals will help companies distinguish between short-term political uncertainty and a lasting change in export economics.
The Bottom Line
The stalled India–US trade deal creates uncertainty for Indian manufacturers, but it does not mean every exporter will face the same risk—or that a new, across-the-board tariff has already been imposed.
The commercial impact will depend on product-level duties, sector-specific measures, customer contracts and the competitiveness of each supplier. Companies with high US exposure should urgently review their landed costs and order pipeline, while others should use this period to strengthen productivity, diversify markets and improve supply-chain resilience.
For Indian manufacturers, the priority is clear: plan for tariff uncertainty today rather than wait for a trade agreement tomorrow.
Editorial note: Trade negotiations and tariff rules can change quickly. Verify current US tariff notifications, product-specific duty rates and official government announcements before making commercial decisions.
