The United States’ decision to impose a 26 percent tariff on Indian imports has brought significant changes to trade relations between the two countries. This move is expected to have a major impact on several key industries in India that rely on business from exports. While the tariff aims to address trade imbalances, it raises concerns for sectors such as electronics, textiles, and agriculture.
Here’s a closer look at the industries most affected and how India is responding to these challenges
Sectors Most Affected:
1. Electronics and Gems & Jewellery
The electronics sector, which exported USD 13 billion worth of products to the US in 2024, will face serious challenges. The previous tariff was just 0.41 percent, but the sharp increase to 26 percent makes Indian goods less competitive. Similarly, the gems and jewellery industry, with USD 9 billion in exports, will struggle as tariffs rise from 2.12 percent to 26 percent, affecting its market position.
2. Textiles and Apparel
The textile sector, which sent USD 9.6 billion worth of goods to the US in FY24, is another major victim. The US is one of India’s largest buyers, accounting for 28 percent of these exports. Products like carpets, which make up 58 percent of India’s textile shipments to the US, could lose ground to competitors like Bangladesh and Vietnam.
3. Automobiles and Auto Components
While the new 26 percent tariff does not apply to automobiles, the sector is already facing existing 25 percent duties. Companies like Tata Motors’ Jaguar Land Rover (JLR) saw a 5 percent stock decline after the announcement, while auto parts manufacturer Sona Comstar dropped 4 percent, reflecting market concerns over trade barriers.
4. Agriculture and Processed Foods
Indian exports of seafood and meat, valued at USD 2.58 billion, will now face a 27.83 percent tariff. Products like liquor, sugar, and processed meat have been hit with additional duties, making it harder for Indian exporters, particularly small and medium-sized businesses, to compete in the US market.
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Sectors with Temporary Relief:
1. Pharmaceuticals
India exports USD 12.2 billion worth of pharmaceuticals to the US, and for now, the sector is exempt from the new tariffs. However, the Trump administration has hinted at possible future tariffs on this industry, which could pose risks to India’s role as a major supplier of generic medicines.
2. Energy and Minerals
Certain energy exports, such as crude oil and coal, have been left out of the new tariffs, providing some relief for India’s USD 9 billion energy exports. However, future policy changes could still affect the sector.
India’s Major Exports to the US in CY24 (USD mn):
| Export Item | Export Value (USD mn) | % Share in Total Exports to the US |
| Electrical Machinery | 12,580 | 15.6 |
| Gems and Jewellery | 9,299 | 11.5 |
| Pharmaceutical Products | 8,875 | 11.0 |
| Nuclear Reactors, Boilers, and Machinery | 6,572 | 8.1 |
| Refined Petroleum Products | 4,465 | 5.5 |
| Articles of Iron and Steel | 2,955 | 3.7 |
| Textile Articles | 2,948 | 3.7 |
| Auto & Auto Ancillaries | 2,660 | 3.3 |
| Non-Knitted Apparel Articles | 2,591 | 3.2 |
| Organic Chemicals | 2,588 | 3.2 |
| Knitted Apparel | 2,586 | 3.2 |
| Marine Products | 1,969 | 2.4 |
| Plastic Articles | 1,631 | 2.0 |
| Miscellaneous Chemical Products | 1,243 | 1.5 |
| Carpets and Other Textile Floor Coverings | 1,196 | 1.5 |
| Furniture | 1,150 | 1.4 |
| Others | 15,465 | 19.1 |
| Total Exports to the US | 80,774 | 100.0 |
Source: Minister of Commerce and Industry
Wider Economic and Market Impact
The manufacturing sector is expected to experience a slowdown, with experts forecasting a 50-basis-point reduction in GDP growth due to diminished export competitiveness. Meanwhile, the Indian rupee weakened to 85.69 per US dollar as investors shifted to safer assets like gold and Japanese bonds, leading to sell-offs in the metals and oil sectors.
Although IT exports remain unaffected by the new tariffs, concerns over reduced US consumer spending could impact demand for Indian IT services, prompting analysts to downgrade the sector’s outlook.
Conclusion
The US tariff hike is a major challenge for Indian exporters, particularly in sectors like electronics, textiles, and agriculture. While exemptions for pharmaceuticals and energy provide temporary relief, future uncertainties remain. India’s ability to adapt through trade negotiations and market diversification will be crucial in determining how it weathers these economic shifts. As global trade policies continue to evolve, India’s response will shape its position in the international market.
Written by – Siddesh S Raskar
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