Tariff Relief and Trade Deal Boost India’s Export-Oriented Chemical Sector

India and the United States represents a significant recalibration of bilateral economic relations, with direct implications for export-oriented industries, particularly chemicals. A key element of the understanding is the reduction in reciprocal US tariffs on Indian goods from 25 per cent to 18 per cent, alongside commitments by both sides to lower trade frictions and improve market access.

In parallel, India has outlined a strategic shift in its energy sourcing, including a gradual reduction in reliance on Russian crude oil and a substantial increase in purchases of energy and other strategic goods from the United States and alternative suppliers. These purchases covering energy, technology, agricultural products, coal, and other materials are expected to cumulatively exceed $500 billion over time.

While the agreement strengthens overall trade sentiment, its impact across the chemical value chain will be uneven. Specialty, performance, and value-added chemical segments are positioned to benefit the most, whereas highly commoditised and margin-sensitive segments may see limited upside.

Key Trade Developments Relevant to Chemicals
From an industry perspective, three elements of the understanding are particularly important:

1. Reduction in US Import Tariffs on Indian Goods: Lower tariffs directly reduce landed costs for Indian chemical exports, improving price competitiveness against suppliers from other regions.

2. Commitment to Reduce Non-Tariff Barriers: Streamlining regulatory and procedural barriers improves ease of doing business for Indian exporters, especially those supplying intermediates and specialty molecules requiring strict compliance.

3. Strengthening of Long-term Trade and Supply Relationships: The broader geopolitical and economic alignment enhances confidence among US buyers looking to diversify supply chains beyond traditional sourcing hubs.

Positive Impact on the Indian Chemical Sector

1. Improved Export Competitiveness
Indian chemical exports to the US are largely concentrated in specialty chemicals, intermediates, fluorochemicals, performance additives, pigments, and surfactants. Lower tariffs enhance margins or allow price adjustments to gain market share, especially in products where India already enjoys process and cost advantages.

2. Reinforcement of the “China-plus-one” Strategy
US customers have been actively reducing dependency on single-country sourcing. The trade understanding strengthens India’s position as a reliable alternative supplier for complex and regulated chemical products.

3. Better Capacity Utilisation and Order Visibility
Export-oriented manufacturers with existing US customer relationships are likely to see improved order flow, longer-term contracts, and better capacity utilisation over the medium term.

Chemical Segments Likely to Benefit the Most

Specialty and Performance Chemicals
These products are less commoditised, more relationship-driven, and sensitive to regulatory compliance rather than only price. Tariff relief significantly improves their competitiveness.

Beneficiary segments include:

• Fluorochemicals
• Custom synthesis and fine chemicals
• Specialty intermediates
• Polymer additives and performance ingredients
• Agrochemical

Companies with Established US Exposure
Indian companies already exporting to the US are best placed to benefit immediately.

These include:

These companies benefit from:

• Established regulatory compliance
• Long-standing customer relationships
• Diversified product portfolios
• Ability to pass through or absorb cost changes

Indian Chemical Companies: Company Portfolio