Editor’s Note
This article examines the immediate impact of new U.S. tariff rates on key Indian export sectors, highlighting the uneven consequences for industries from pharmaceuticals to textiles. It raises critical questions about India’s trade strategy moving forward.
The new tariff rates set to take effect from April 9 on goods exported to the United States have left several key Indian sectors in a state of confusion. The impact of these ‘reciprocal tariffs’ announced by President Donald Trump is profound in some areas and hidden in others. While sectors like pharmaceuticals are breathing a sigh of relief, industries such as gems & jewellery, textiles, and telecom are standing on the brink of a crisis. This raises the question: will India be able to maintain a trade balance with the US?
India’s gems and jewellery sector exports approximately $9.2 billion to the US annually. The tariff on this has now been increased from 5.5-13.5% to 31.5-39.5%. This increase seems heavy at first glance, but even higher tariffs on competitors like China could still keep India competitive for now. However, the exemptions granted to Canada and Mexico through the US-Mexico-Canada Agreement (USMCA) could pose a threat to India’s long-term market share.
Until now, there was no tariff on the telecom sector. But now, a direct 26% duty has been imposed on $6 billion worth of exports. This change has left the industry stunned. There is hope that the government will extend the Production Linked Incentive (PLI) Scheme beyond 2026 and expedite a Bilateral Trade Agreement (BTA) with the US.
| Sector | Trade Value | Previous Tariff | New Tariff | Difference |
|---|---|---|---|---|
| Gems & Jewellery | $9.2 billion | 5.5-13.5% | 31.5-39.5% | 26% |
| Telecom | $6 billion | 0% | 26% | 26% |
| Textiles | $9.5 billion | 6-9% | 32-35% | 26% |
| Pharmaceuticals | $8.73 billion | 0% | 0% | 0% |
| Oil and Gas | $5.8 billion | 5.20% | 5.20% | 0% |
| Passenger Cars, Light Trucks | $5.1 billion | 2.50% | 27.50% | 25% |
| Agriculture & Food Products | $5.5 billion | 4-5% | 30-31% | 26% |
| Auto Parts | $2.1 billion | 2.50% | 27.50% | 25% |
The textile industry, with $9.5 billion in exports, will now face tariffs of up to 35%, three times higher than before. Even though taxes on Vietnam and Bangladesh are higher, the advantage India had based on the cost of shipping goods to the US has diminished. The industry is demanding immediate policy reforms so that India can maintain its grip on the global market.
While other industries are struggling, the pharma sector stands as an example of relief. This sector, with $8.73 billion in exports, has been exempted from tariffs under Annexure-II. This stability is extremely important for India, especially post-COVID-19 when both India’s credibility and demand in the global pharma market have increased.
There has been no impact on the $5.8 billion oil and gas exports. However, tariffs on $5.5 billion worth of agriculture and food products have increased from 4-5% to up to 31%. This is eroding the advantage India had over other countries regarding the cost of shipping goods to the US. Regions like Latin America could benefit from this.
Auto parts now face a 27.5% tariff, which deals a severe blow to India’s $2.1 billion exports. Although the passenger car segment is only worth $5.1 billion, it has been taxed equally. This is a sign that if not addressed in time, future prospects could also be affected.
Trade organizations and exporters have demanded immediate and active diplomatic efforts from the government.
As global trade moves towards protectionism, India will have to bring changes to its export structure. Bilateral deals, expansion into new markets, and investment in innovation and supply chain efficiency are no longer options but necessities. Will India be able to turn this challenge into an opportunity? This will depend on the policy and diplomacy of the coming months.