Lower tariffs of 18%, surging smartphone exports and a strategic reset with Washington; why India’s electronics and semiconductor story just got a powerful new push?
India’s expanding electronics and semiconductor manufacturing sector is set for a boost after the United States (US) agreed to sharply reduce reciprocal tariffs on Indian goods to 18%, down from 25% levels that had climbed as high as 50% in recent months.
The tariff reset is expected to ease trade risk, improve supply chain predictability and reinforce India’s position as a preferred alternative manufacturing hub for global electronics companies.
According to a report by The Economic Times, the deal creates a path of a $100 billion opportunity for the electronics and semiconductor industry. While electronics had been largely insulated from new levies under US Section 232, industry executives said the broader tariff reduction matters far beyond headline rates.
Electronics manufacturing relies on deeply integrated global supply chains, in which components and sub-assemblies cross borders multiple times. Lower friction across the overall trade framework reduces uncertainty for multinational firms making long-term investment decisions.
Several reports have noted that the timing of the agreement is particularly favourable for India’s electronics exports, which have surged despite earlier tariff pressures. Smartphone shipments to the US rose 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 sharp rise helped cushion declines in other traditional export segments at a time when concerns were growing about a broader slowdown.
The deal was announced late on Monday, February 2, 2026, by US President Donald Trump following a telephonic conversation with Prime Minister Narendra Modi, nearly a year after both sides agreed to pursue a comprehensive bilateral trade pact. This came one day after the Union Budget 2026 was tabled at the lower house of the Indian parliament.
Trump said the agreement would take effect immediately. It includes a rollback of the additional 25% punitive duty imposed on Indian goods in response to India’s purchases of Russian crude oil.
In return, India will reduce tariffs and non-tariff barriers on US products and significantly expand imports of American energy, technology, agricultural goods and coal. Trump said India had committed to buying more than $500 billion in US products over time and would increase ‘Buy American’ purchases.
Prime Minister Modi welcomed the announcement, saying reduced tariffs on Made-in-India products would unlock new opportunities for cooperation between the world’s two largest democracies. He added that closer economic ties would benefit both countries and contribute to global stability.
Market sentiment responded swiftly. Overseas Nifty futures rose sharply late on Monday, signalling optimism over reduced trade risk and improved export visibility for Indian companies.
From a competitiveness perspective, the 18% tariff places India favourably among Asian peers. Bangladesh, Sri Lanka and Vietnam face tariffs of around 20%, while Indonesia, Malaysia and Thailand are at roughly 19%.
More advanced economies such as Japan and South Korea enjoy lower rates of about 15%. China, by contrast, continues to face much steeper US tariffs averaging nearly 48%.
Industry leaders said the agreement complements ongoing strategic initiatives such as the Initiative on Critical and Emerging Technologies (iCET) and TRUST, which aim to build trusted supply chains and deepen technology collaboration between India and the US.
Together, these frameworks are critical to scaling electronics manufacturing, semiconductor design, and advanced packaging in India.
Meanwhile, global firms have already accelerated their plans in India. Apple now manufactures multiple iPhone models locally, with exports accounting for a growing share of output. Foxconn and other suppliers have expanded capacity across Tamil Nadu and Karnataka, supported by a widening domestic vendor base.
