Indian MSMEs Poised to Gain from U.S. Tariff Advantage

In a significant realignment of global trade equations, Indian exporters—particularly micro, small and medium enterprises (MSMEs)—stand to gain immensely from the United States’ newly revised tariff structure. The change is creating a window of opportunity that could redefine India’s export landscape over the coming decade.

According to NITI Aayog’s latest Trade Watch report, India now holds a competitive tariff edge in over half the product categories it exports to the United States. The report estimates that 22 of the 30 major product lines—covering $49.3 billion worth of Indian exports—have become more competitive under the new tariff regime. These 22 products alone account for 61% of India’s total exports to the U.S. in FY25.

This shift comes at a crucial time, when the global trade environment is undergoing structural changes driven by geopolitics, supply chain recalibrations, and a growing push to diversify away from China. In many of the categories where Indian exporters are now favoured, China faces significantly higher tariffs, offering India a comparative advantage. The report reveals that the average tariff differential between Indian and Chinese exports stands at a remarkable 20.5% in India’s favour.

At a more granular level, the study identifies 78 specific product lines, mapped at the four-digit harmonised system (HS) code level, where India can secure fresh ground in the U.S. market. These products currently account for $42 billion of Indian exports to the United States, against a massive $873 billion in overall U.S. imports, underscoring the size of the untapped market.

Several MSME-dominated sectors are at the heart of this opportunity. These include textiles and apparel, seafood, electronics, plastics, furniture, and mineral-based products—industries where small and mid-sized enterprises have traditionally played a dominant role in India’s export ecosystem. The new tariff structure tilts the playing field in their favour, especially in price-sensitive segments.

“India is now more competitive in the U.S. market across a majority of categories at both the HS two-digit and four-digit levels. This opens up an opportunity worth over $2.2 trillion in the long term,” said Pravakar Sahoo, Programme Director at NITI Aayog, highlighting the scale of potential gains.

INDIA-US BILATERAL TRADE

These developments are unfolding against the backdrop of active negotiations between India and the United States on a Bilateral Trade Agreement (BTA). While a full-fledged deal may take time, an interim framework is expected before the fall of 2025. The proposed agreement is likely to offer enhanced market access for Indian firms, especially in labour-intensive and high-tech sectors. However, Indian negotiators remain firm on safeguarding sensitive areas like agriculture and rural livelihoods.

The timing couldn’t be more strategic. In 2024, India’s bilateral merchandise trade with the U.S. stood at $123.8 billion, with a trade surplus of $37.7 billion in India’s favour. The U.S. remains India’s largest export market, accounting for 18.3% of its total outbound trade. Between 2016 and 2024, India’s exports to the U.S. grew at a compound annual growth rate of 7.5%, nearly doubling from $42.7 billion in 2014 to $80.8 billion in 2024.

NITI Aayog’s report also factors in the broader global trade environment. As of July 10, 2025, the U.S. has imposed an additional 10% baseline tariff on most imports, excluding those from Mexico and Canada, which face even higher tariffs of 25% and 35% respectively. Imports from China have been hit with an extra 30% tariff. These differentials significantly enhance India’s competitiveness in the U.S. market, especially for MSMEs operating in global value chains.

MSME EXPORTERS

For Indian businesses—particularly smaller exporters—the message is clear: the U.S. market is more accessible than it has been in recent memory. What’s required now is a coordinated effort to scale production, meet quality standards, and leverage export promotion schemes effectively.

India’s long-term goal of reaching $500 billion in bilateral trade with the U.S. by 2030 appears increasingly achievable. But to get there, MSMEs will have to lead the charge, transforming themselves from small players into strategic exporters for the global economy.