US-India trade deal offers auto exporters relief, but tariff fog remains

India's auto component exporters may see relief under the interim US-India trade framework, but industry bodies say clarity on Section 232 tariffs and quota rules is needed to gauge gains

The interim trade framework agreed between India and the United States has offered cautious relief to India’s auto and auto component exporters, even as several operational details remain unresolved. 

The joint statement signals intent to lower trade frictions and improve market access, but industry bodies say clarity on tariffs, especially under the US’s national security provisions, is still awaited before the real impact can be assessed.

 

India currently exports around $6.5 billion worth of auto components to the US, making it one of the largest destination markets for the sector. About 50 per cent of these exports fall under Section 232 tariffs, imposed on national security grounds, which attract a 25 per cent duty, while the rest were earlier subject to reciprocal tariffs that had gone as high as 50 per cent. In October last year, the US clarified that all auto components, whether under Section 232 or reciprocal tariffs, would attract a uniform 25 per cent duty.

   

The latest joint statement indicates that reciprocal tariffs have been reduced to 18 per cent, and also mentions that India will receive a preferential tariff rate quota for automotive parts under Section 232. However, it remains unclear whether the 18 per cent rate will apply only to the reciprocal portion or extend to Section 232 items as well. 

Analysts say the language in the joint statement, while not explicit, is directionally positive. Anurag Singh, Adviser at Primus Partners, said the reference to preferential tariff rate quotas under Section 232 is encouraging for Indian auto parts makers. “The proposed reduction from 25 per cent to 18 per cent places India in a marginally better position than Vietnam at 20 per cent and Thailand at 19 per cent. This restores confidence after months of uncertainty that disrupted planning for manufacturers,” he said.

 

The Automotive Component Manufacturers Association of India (ACMA), in a formal statement, welcomed the interim agreement framework, calling it a signal of deeper manufacturing and supply-chain alignment between the two countries. Vikrampati Singhania, President, ACMA and Vice Chairman & MD of JK Fenner (India), said the commitment to preferential tariff rate quotas for automotive parts, removal of Section 232 tariffs on select inputs, and a pathway for further tariff rationalisation under the proposed Bilateral Trade Agreement were positive steps for the industry.

 

“These measures will enhance export competitiveness, deepen technology collaboration, and reinforce India’s role as a trusted partner in resilient global automotive supply chains,” Singhania said, adding that ACMA looks forward to constructive engagement with both governments to ensure balanced market access and long-term policy certainty.

 

The US has steadily emerged as India’s largest export market for auto components. India’s shipments to the US rose from $3.6 billion in FY21 to $6.2 billion in FY25, while US exports to India remained significantly lower at $1.5 billion, underlining India’s growing trade surplus in the segment. In FY25, the Indian auto component industry recorded a total turnover of $80.2 billion, exports of $22.9 billion, and a trade surplus of $500 million, according to ACMA.  Others caution that the benefits will ultimately hinge on the outcome of the ongoing US Section 232 investigations. Analysts also expect that a defined quantity of Indian auto parts could be allowed entry at lower or potentially zero tariffs, similar to quota-based arrangements the US has with other trading partners such as the EU.