Editor’s Note
A new 50% U.S. tariff on Indian goods, effective today, threatens exports worth an estimated ₹5.4 lakh crore. Key sectors like apparel and gems may see significant price increases in the U.S. market.
A 50% tariff on goods exported from India to the United States has taken effect today, August 27. According to a report by the Global Trade Research Initiative (GTRI), this new tariff could impact approximately ₹5.4 lakh crore worth of Indian exports.
Countries with lower tariffs, such as China, Vietnam, and Mexico, will sell these goods at cheaper prices. This will reduce the market share of Indian companies in the American market.
India exported $19.16 billion (approx. ₹1.68 lakh crore) worth of engineering goods in 2024, including steel products, machinery, automotive parts, electrical machinery, and other industrial equipment. The US is the largest market for Indian auto parts, accounting for about 32% of total auto parts exports in FY25.
The tariff increase could impact exports worth ₹30,000 crore out of the annual $7 billion (approx. ₹61,000 crore) auto parts exports. Small and medium enterprises (SMEs), which contribute 40% to engineering goods exports, will be the most affected, potentially putting thousands of jobs at risk.
India exported $14 billion (approx. ₹1.23 lakh crore) worth of electronics to the US in 2024, with smartphones, particularly iPhones, constituting a major share. India is the largest supplier of iPhones to the US, with 44% of smartphones sold in the US being manufactured in India.
Currently, electronics have an exemption. Until a Section 232 tariff is announced, exports of smartphones like Apple and Samsung to the US will not be affected. Section 232 is part of the US Trade Expansion Act of 1962, allowing tariffs on imports based on national security grounds. A final decision on tariffs will be made after the Section 232 review. If the new 50% tariff is applied post-announcement, electronic goods exported from India to the US will become more expensive, and companies may consider manufacturing electronics items destined for the US in other countries.
India exported $10.52 billion (approx. ₹92 thousand crore) worth of pharmaceuticals to the US in 2024, constituting nearly 40% of US pharma exports. While pharma currently has an exemption, Trump has threatened tariffs of 150% within 18 months and later 250%. A $100 drug could double in price, hurting major Indian companies like Sun Pharma, Dr. Reddy’s, Cipla, and Lupin.
India exported $9.94 billion (approx. ₹87 thousand crore) worth of gems and jewelry to the US in 2024, accounting for 44.5% of US diamond imports. Some jewelry already faced tariffs up to 25%. The new tariff has increased to 50%. Price hikes could lead to a 15-30% drop in exports. American buyers may turn to cheaper alternatives, endangering the jobs of Indian artisans. Indian companies may consider setting up manufacturing facilities in countries with lower tariffs like Dubai (10%) and Mexico (25%).
India exported $10 billion (approx. ₹87 thousand crore) worth of textiles to the US in 2024, including ready-made garments, cotton yarn, and carpets. In Q1 of this year, India’s total exports grew 10% to $4 billion, with exports to the US increasing by 14%.
The new tariff could increase the price of 50% of Indian apparel by 50%. Demand for clothing could drop by 20-25%. India’s share of US textile imports is expected to fall from 33% last year to 20-25% this year.
The seafood sector, with exports worth approximately ₹24,000 crore to the US, is now under threat due to the new tariffs, which will make Indian seafood less competitive.