Garments, Leather, Footwear Set to Gain as India-US Trade Deal Lowers Tariffs

A new trade agreement between India and the United States, finalized on Monday, February 3, 2026, is expected to provide a significant boost to India's garments, leather, and footwear industries. The deal, announced by US President Donald Trump, will see the US lower its tariffs on Indian goods from 25% to 18%. In return, India has agreed to reduce its tariffs on US goods to zero and purchase over $500 billion worth of American products, including energy and technology.

The reduction in tariffs comes as a welcome relief to Indian exporters, particularly those in the labor-intensive garments, leather, and footwear sectors. These industries had been struggling to compete in the US market due to the previously high tariffs, with some exporters forced to offer discounts of 10-40% to retain American buyers, significantly reducing their profit margins. The smaller players had virtually stopped shipments over the last few months and the bigger ones, with deeper pockets, were sustaining it thanks to steep discounts that they were offering even as their US buyers too were taking a small hit.

The US has historically been India's largest export destination for leather and leather products. In fiscal year 2025, shipments to the US had grown 16.58% year-on-year to $1.05 billion, accounting for 21.65% of India's total leather exports. However, the imposition of steep tariffs had led to a sharp fall in Indian leather exports, forcing discounts, layoffs, and market shifts. In Bantala near Kolkata, one of Asia's largest leather hubs, exports to the US had dropped by around 25%.

With the reduction in tariffs, Indian goods are suddenly looking more competitive. At 18%, the levy on Indian garments will be marginally lower than the 20% faced by those made in Bangladesh or Sri Lanka. Similarly, Indian carpets, which had lost significant market share, will now be competitive against those shipped from Turkey.

The India-US trade deal has come at an opportune time for Indian garment and leather and footwear makers, who were worried about orders for the next season. The deal is expected to boost India's export competitiveness and increase sourcing by US garment and shoe manufacturers.

The agreement was reached just days after India sealed a sweeping trade deal with the European Union. Under the India-EU trade deal, tariffs on textiles, apparel, and clothing will be 0%, compared to 12% earlier, and tariffs on leather and footwear will also be 0%, compared to 17% earlier.

Union Defence Minister Rajnath Singh said that the India-US trade deal was a landmark moment for India-US relations. He added that the deal would open a new chapter of deeper and greater economic cooperation, strengthen the strategic partnership between the two countries, and deliver tangible benefits to both countries and their people.