India-US trade deal may have a $100-bn opportunity for India’s electronics exports. Here’s why

On Monday, India and the US finally agreed to a trade deal that has been months in the making, as US President Donald Trump said that the US “effective immediately” has lowered tariffs on India to 18% from 50%.

This comes after India addressed several US demands in the Budget and also began aggressively signing trade deals with other countries, including the UK and the EU.

Union IT Minister Ashwini Vaishnaw said: “US and India have complementary strengths. Both countries can co-create technologies and co-develop solutions that will benefit the world. A trade deal between the US and India will lead to a brighter future for both countries…. (it) is a win-win deal. Citizens and industries of both countries will benefit greatly…”

What is also increasingly being seen as a positive thing for India is the slightly lower tariff than its prime competitor in the electronics manufacturing race, Vietnam, which faces a 20% reciprocal tariff. This could allow India to take a larger share in companies’ “China+1” diversification strategy. 

A crucial sector

The electronics manufacturing sector, concentrated in states including Tamil Nadu, Karnataka, Uttar Pradesh and Maharashtra, currently employs more than two million workers directly. The sector supports a network of component suppliers, assemblers and technology service providers. 

The escalation in tensions between India and the US had cast a shadow over the electronics sector in the country. At the height of the tensions, US President Donald Trump had threatened to impose a 25% tariff on Apple if it sold India-made iPhones in the US.

Apple, which has been a flagbearer of electronics exports from India owing to government subsidies under the production-linked incentive (PLI) scheme for smartphone manufacturing, has created a wide supply chain network in India to meet its manufacturing requirements. 

India currently accounts for nearly a quarter of all iPhones that are produced, behind China.  

“The India-US trade deal can be a major catalyst for India’s electronics, semiconductor, and technology ecosystem. By improving market access, enabling smoother flow of capital equipment and advanced technologies, and—when complemented by the iCET and TRUST initiatives—strengthening trusted supply chains and deepening technology collaboration, the agreement significantly enhances India’s attractiveness as a global manufacturing and innovation hub,” said Ashok Chandak, president of SEMI India and IESA.

He said: “It will accelerate semiconductor design and manufacturing, boost electronics value addition, and expand cooperation across AI, data centres, and advanced manufacturing — creating high-skill jobs and positioning India as a strategic and reliable partner in the global technology value chain. The vision of $500 billion bilateral trade can have over $100 billion USD trade for the electronics and semiconductor sector”.

Pankaj Mohindroo, Chairman of the India Cellular and Electronics Association (ICEA), said: “This is a positive and competitive outcome for India. At the agreed 18% rate, India remains well placed relative to key manufacturing peers, and retains its attractiveness as a global manufacturing and export hub… We see strong potential for expanded technology collaboration and envision electronics trade reaching $100 billion within the broader $500 billion India–US trade ambition”.