The new trade framework between the United States and India aims to integrate industrial supply chains by reducing tariffs on machinery, automotive components, and aerospace parts. This shift, formalized through an Interim Agreement framework, follows India’s commitment to halt imports of Russian oil and increase purchases of American energy and defense products.
As part of a new trade agreement, the US will lift tariffs on specific aircraft and aircraft parts imported from India. These tariffs were originally put in place to safeguard the US aluminium and steel industries.
In the aerospace sector, the removal of tariffs on aircraft, engines, and key components lays the groundwork for long-term benefits. It will also help lower costs for Indian airlines and maintenance facilities. As a result, it encourages the growth of local manufacturing for repairs and components, reducing the need for expensive imports from Europe or East Asia.
Strengthening the MRO Corridor
“For the MRO sector, this agreement means more locally manufactured rotables, consumables, and spare parts. It helps reduce turnaround times, lower inventory costs, and enhance fleet availability,” Anurag Gupta, a partner at Deloitte India, said.
With more parts produced or stocked in India for US-connected fleets, airlines can decrease the time their aircraft spend on the ground waiting for imported components to clear customs.
However, industry specialists also caution against overstating the tariff angle in aerospace.
“World over, aerospace and aerostructures never did attract tariffs, duties, VAT or GST as production lines were linked to final assembly lines and a larger supply chain framework,” said Mark D Martin of Martin Consulting, noting that many contracts between Indian manufacturers and US primes such as Boeing, Sikorsky, and RTX had already been structured around duty‑neutral flows.
He added that removing Washington’s own recent tariff overlay mainly restores the pre‑Trump baseline rather than fundamentally changing the logic of these cross‑border production lines.
In the engineering products industry, the advantages are primarily driven by price. Indian exporters send a substantial number of engines, transmission parts, forgings, and precision castings to the U.S., but these goods have been subject to duties of 7.5% to 25% since 2019, alongside a 25-point Russia-related surcharge that has pressured profit margins. Over the past few years, Indian companies have become key suppliers for global OEMs, providing not just precision parts and components but also complex items.
Under the trade deal, tariffs on Indian products arriving in the US will decrease, while India will also lower its tariffs on selected US industrial imports. Exporters are likely to benefit from clearer information on the tariffs applied, reducing the chances of sudden changes caused by emergency measures. This change is particularly important for sectors like machinery and metal goods, where India has a strong presence but struggles with pricing. The move from random penalties to clear schedules is just as significant as the overall tariff rates.
Industry estimates indicate that Indian companies have made about $6–7 billion from auto component exports to the U.S. in recent years, with this market representing over a quarter of the sector’s total outbound sales.
Surcharges to Predictable Pricing
The reduction in duties and more predictable rates will directly improve their chances of winning long-term contracts.