Editor’s Note
This article examines the immediate economic impact of new U.S. tariffs on Indian goods, which took effect on August 27. The analysis focuses on the resulting price increases for exports and the broader implications for trade relations.
The decision by US President Donald Trump to impose an additional 25% tariff as a penalty on top of the existing 25% general import duty on India is taking effect today (August 27). After Trump’s 50% tariff is implemented, exports of many Indian products to the US will become more expensive.
It is certain that most products exported from India to the US will become more expensive there due to this decision. It is believed that this could be a blow to Indian exporters, as the US is a major buyer of Indian products. With the increase in tariffs, American citizens may prefer goods from other countries with lower tariff rates over Indian products.
Our textiles, gems and jewelry, agriculture, and some other sectors are likely to feel the impact of this tariff. Taking the 25% tariff effective from August 7 as an example, rice that American citizens were getting for 100 rupees will now cost them 125 rupees after the 25% import duty. After the additional 25% tariff imposed on August 27, this will increase to 150 rupees. The situation will be similar for products from different sectors.
A large portion of India’s textile industry exports depends on the US. 28% of India’s total textile exports go to the US alone, with a total value of over $10.3 billion. The new tariff will have the greatest impact on this sector. Meanwhile, countries like Vietnam, Indonesia, and Bangladesh will benefit from this. The US is imposing a 19% tariff on Vietnam, while Trump has imposed a 20% tariff on Indonesia. In this regard, India’s textile sector is likely to suffer losses in competition due to the US tariff. Similarly, the tariff rate on Bangladesh and Cambodia is also less than 20%.
India’s gems and jewelry sector is also expected to be significantly impacted by the US tariff. This sector exports $12 billion worth of goods to the US every year. Currently, a baseline 10% US tariff applies to this industry, which was announced in April. Prior to that, the duty was zero on polished diamonds, 5-7% on gold and platinum jewelry, and 5-13.5% on silver jewelry. Due to the new tariff, sectors related to gems and jewelry are likely to face significant losses.
India currently exports over $5.6 billion worth of agricultural products to the US. Its major exports include marine products, spices, dairy products, rice, Ayurveda and herbal products, edible oils, sugar, and fresh vegetables and fruits. It is believed that Trump’s tariff will have the greatest impact on India’s seafood industry, i.e., marine products.
In addition to these sectors, the leather and footwear industry exports $1.18 billion, the chemical industry $2.34 billion, and the electrical and machinery industry $9 billion to the US every year.
India’s electronics sector is the largest exporter to the US. In recent years, India has become the largest exporter to the US in terms of smartphones, laptops, servers, and tablets. News agency PTI reported on Thursday, citing government sources, that for the US to impose import duties on this sector, it would have to conduct a Section 232 review. This means this sector is expected to get relief from the US tariff.
The US is the largest destination for India’s pharma sector. According to reports, India’s total exports to the US were $10.5 billion. That is, about 40% of India’s total pharma exports go to the US alone. Analysts have claimed that India’s pharma sector has been kept out of the scope of Trump’s tariff for now. Brokerage house Jefferies has said that for now, the impact of Trump’s retaliatory tariff on the Indian pharma sector will be minimal, but an additional tariff in the future cannot be ruled out.
Amar Ujala tried to understand from two experts on economic matters what the future impact of Trump’s tariff would be. Let’s see what the experts say on this issue…
