US trade deal eases risk, lifts outlook for India’s electronics, semiconductor manufacturing

iPhone 17

• US to cut tariffs on India to 18 percent and remove non-tariff barriers
• India to lower trade barriers and boost US energy, tech, and farm imports
• Tariff cuts boost electronics exports, enhancing India's role as China alternative

Did our AI summary help?

The United States will cut reciprocal tariffs on Indian goods to 18% from 50% and roll back non-tariff barriers under a new bilateral trade pact announced by US President Donald Trump, in a move that could significantly bolster India’s fast-expanding electronics and semiconductor ecosystem. In exchange, India will ease its own trade barriers and increase imports of US energy, technology and agricultural products.

While electronics were already shielded from fresh levies under Section 232 provisions, industry leaders said the broader tariff reset meaningfully reduces systemic trade risk, strengthens supply chain confidence and enhances policy predictability — critical factors for capital-intensive electronics and semiconductor manufacturing.

Coupled with initiatives such as iCET and TRUST, the agreement is seen as a structural boost to trusted supply chains, advanced technology flows and deeper India–US collaboration, reinforcing India’s position as a global manufacturing and innovation hub.

The timing of the deal is significant. India’s electronics exports to the US have grown sharply, driven primarily by smartphones. India’s smartphone exports to the US surged more than 200% year-on-year between April and November of FY26 to $12.54 billion, compared with $4.1 billion in the same period last year, according to commerce department data.

The threefold jump helped offset sharp declines in several traditional export segments even as the US had imposed a steep 50% duty across the board, triggering concerns of a broader export slowdown.

Even though Section 232 shields electronics from fresh duties, reciprocal tariff reductions reduce systemic trade risk. Electronics manufacturing operates through deeply integrated global supply chains, where components and sub-assemblies cross borders multiple times before final assembly. Lower friction across the broader trade framework enhances predictability, a key consideration for multinational manufacturers allocating capital.

A more stable US–India trade corridor strengthens India’s positioning as a credible alternative manufacturing hub to China, particularly for high-value electronics.

Companies such as Apple and its key contract manufacturer Foxconn have significantly expanded production capacity in India over the past few years. Apple now manufactures multiple iPhone models locally, with exports accounting for a substantial portion of output. Foxconn has ramped up investments across Tamil Nadu and Karnataka, alongside a growing supplier ecosystem.

For global firms evaluating incremental capacity additions, greater policy clarity between the two countries is a strategic positive, experts said.

Pankaj Mohindroo, Chairman, ICEA said that the deal 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.

"While we await the finer details of the deal, the direction clearly supports India’s strategy of scaling manufacturing and integrating deeper into U.S.-led global value chains, particularly in electronics. We see strong potential for expanded technology collaboration and envision electronics trade reaching $100 billion within the broader $500 billion India–U.S. trade ambition," he said.

ICEA represents Apple, Foxconn, Oppo, Vivo, Dixon and Lava among others.

“The India–US trade deal can be a major catalyst for India’s electronics, semiconductor and technology ecosystem. By improving market access, facilitating smoother flows 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 added that the deal could accelerate semiconductor design and manufacturing, increase domestic value addition in electronics, and expand cooperation in 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. With the broader vision of $500 billion in bilateral trade, the electronics and semiconductor sector alone could account for over $100 billion, he said.

Tarun Pathak, research director at Counterpoint said, "...with the EU FTA and the US trade deal in place, supply chain players that were earlier hesitant are now more likely to expand in India. These agreements signal stability, which is key for building alternate global supply chains."

The India–US partnership is especially important for access to skilled talent and deeper R&D collaboration. Initiatives such as iCET, along with investments in advanced packaging and ATMP facilities, will help build scale in electronics manufacturing and position India as a trusted supply chain partner, Pathak said.

"With hyperscalers also being invited under recent policy measures, the overall environment creates a strong strategic opportunity for India to scale its role in global technology and semiconductor supply chains," he added.