How will Trump’s reciprocal tariffs affect India, the impact on vital sectors, explained
HT analyses the impact of the sweeping tariffs announced by President Trump on Wednesday on the economy and various sectors.
The 27% tariff that India’s exports to the United States will face from next week is relatively lower compared to the duties imposed by the Trump administration on some Asian nations such as Thailand, Vietnam, Sri Lanka and Bangladesh.
And, it is about half of what exports from China will suffer – a 34% reciprocal tariff in addition to the 20% duty imposed earlier. Industry and markets reckon India’s exports will be less adversely affected compared to exports from some of these countries.
They see an opportunity for India in certain product segments, such as textiles and apparel, where Bangladesh and Vietnam are set to become less competitive.
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The White House announced 46% tariffs on Vietnam and 37% on Thailand and Bangladesh. India’s smaller trade surplus with the US, as a proportion of its exports, compared to the surpluses of countries such as Vietnam and Thailand, averted a more adverse rate.
Most analysts expected sectors such as electronics and smartphones, gems and jewellery, fisheries, and textiles and apparel to be most hurt by the 27% tariff. India’s software industry is also expected to take an indirect hit if fears of a slowdown in the US materialise.
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“The imposition of higher reciprocal tariffs by the US on several Asian countries including China, Vietnam, Taiwan, Thailand and Bangladesh presents an opportunity for India to strengthen its position in global trade and manufacturing. However, gains will not accrue automatically. India needs deep reforms for enabling scale production, domestic value addition and improving competitiveness to benefit,” wrote Ajay Srivastava, founder, Global Trade Research Initiative, in a note analysing the reciprocal tariffs.
Assocham president Sanjay Nayar shared this view. He said that while India’s export competitiveness to the US market stands far less impacted on a relative basis. “Our industry should make concerted efforts to increase export efficiency and value addition to mitigate the impact of these tariffs.”
The US is the top destination for India’s exports, accounting for 18% of the total cargo shipped. Electric machinery and equipment goods, including mobile phones, are the top exports from India, followed by pearls, gems and jewellery, pharmaceutical products, nuclear reactors and equipment, and petroleum products.
“While there could be challenges for exports of certain products like smartphones, diamonds, jewellery items and certain textiles, the relative tariff arbitrage vis-à-vis other US trade partners such as China also presents a significant opportunity for Indian exports in the US,” said Gautam Khattar, principal, Price Waterhouse & Co LLP.
HT analyses the impact of the sweeping tariffs announced by President Trump on Wednesday on the economy and various sectors.
Economy and trade
Overall, most analysts and economists worry these tariffs will upend global trade and slow global GDP growth. The impact of these tariffs will become clearer in a few months as the higher tariffs begin to have their effect on prices. Before Wednesday’s announcement, Emkay Global Financial Services analysis suggested that India’s exports to the US could drop by $30-33 billion (0.8-0.9% of GDP) at 26% tariffs, not adjusting for cross-country hits and responses.
On Thursday, the firm’s chief economist Madhavi Arora said, “China’s survival response to massive tariff blow will matter for India, amid its excess industrial capacity and dumping in the world and Asian markets. While we negotiate with the US and other trade partners, we might have to protect against Chinese responses (read tariffs), which could immediately hit domestic industries, and will have a disinflation impulse.”
There are also fears that tariffs may force many businesses to delay their investment as they worry about demand contraction and the flow of cheap imports into the country. This will also slow growth investment-led in the economy.
Electrical products and mobile phones
India’s exports of mobile phones have grown rapidly to about $6 billion after Apple began assembling iPhones in a local facility. But it might suffer a setback due to the tariffs. While a few components required to build an iPhone are sourced locally, most parts are imported from China, South Korea and Taiwan, all countries that have been slapped with high tariffs.
Slower exports of India-assembled iPhones can hurt local component suppliers. In 2023-24, electrical products and mobile phones accounted for 14% of India’s exports to the US. Yet, higher tariffs on Vietnam and Thailand present an opportunity for India to emerge as a preferred destination for new electronics manufacturing facilities.
Gems and jewellery
Pearls, gems and jewellery form a significant proportion of India’s exports to the US and the world. India accounts for about 30% of the US' jewellery imports. Analysts had identified that the sector would be hurt much before the 27% country-level tariff was announced.
Until the iPhone and electrical products exports displaced it, gems and jewellery topped India’s exports to the US. It still accounts for 13% of India’s exports. Rajesh Exports, Titan, Kalyan Jewellers and Tribhovandas Bhimji Zaveri are among the top jewellery exporters.
Pharmaceuticals
For the moment, pharmaceuticals have been exempted from the reciprocal tariff. The Trump administration could impose a sectoral tariff on pharmaceuticals. Pharmaceuticals account for 10% of India’s exports to the US, with Lupin, Cipla, Sun Pharma, Dr Reddy’s and Gland Pharma are among the bigger exporters of drugs and formulations. India is one of the largest exporters of generic drugs to the US.
Textiles and apparels
India is a big exporter of apparel, but has faced stiff competition from smaller nations such as Bangladesh, which have been more competitive. China is a leading supplier of apparel across the world. Other leading centres of production include Vietnam, Thailand and Sri Lanka.
As all these countries have been slapped with high reciprocal tariffs, many see an opportunity for India to corner a larger market share in the US. Gokaldas Exports and Arvind are among the leading suppliers.
“The high tariffs on Chinese and Bangladeshi exports create room for Indian textile manufacturers to gain market share, attract relocated production, and increase exports to the US,” stated Srivastava in a note.
India’s steel and aluminium product exporters, as well as auto parts exporters, will be hit by the 25% tariff. Some auto component manufacturers such as Samvardhana Motherson and Sona BLW, which have manufacturing facilities in Mexico, will be able to mitigate the impact of the tariffs due to the free trade arrangement between that nation and the US.
