US President Donald Trump has imposed the steepest tariffs in a century, escalating his trade war and causing ripples in the global economy. The comprehensive measures, which include tariffs on more than 60 countries, are intended to address what he calls unfair trade imbalances.

India, whose exports to the US are subject to a 26% tariff, is among the most severely affected countries. Although some industries, such as pharmaceuticals and some agricultural exports, may fare better than others, significant Indian industries, including electronics, textiles, and engineering goods, are getting ready for the effects.

Ajay Srivastava, the founder of GTRI, thinks that Trump's move to increase reciprocal tariffs on a number of Asian and European nations, such as China, Vietnam, Taiwan, Thailand, and Bangladesh, could give India a chance to improve its standing in international manufacturing and trade.

Srivastava claims that while pharmaceuticals, semiconductors, copper, and energy products will be tax-free, Indian exports of steel, aluminum, and auto-related goods will be subject to a 25% tariff.

Trup tariffs: Some industries could benefit

India has made concessions on trade issues that are significant to the Trump administration in an effort to avoid such measures, so the tariffs are a major setback. It is anticipated that important export industries like electronics, textiles, engineering goods, and gems and jewelry will be disproportionately impacted by the tariffs. 

Government representatives and business executives, however, have made an effort to minimize worries by claiming that India is still in a stronger position than some of its rivals. "It is a mixed bag and not a setback for India," a senior official revealed to the Indian Press Trust.

As per Bajaj Broking Research, the Indian export industry is expected to face challenges due to this tariff increase. Key sectors such as textiles, pharmaceuticals, and automotive components, which have significant export volumes to the U.S., may experience reduced demand, affecting production and employment. The Federation of Indian Export Organisations (FIEO) has expressed concerns, stating that the new tariffs will make Indian products less competitive in the U.S. market. Additionally, the announcement has already led to currency fluctuations, with the Indian rupee depreciating in the non-deliverable forward (NDF) market, signaling potential volatility in financial markets.

In response, the Indian government is currently assessing the economic implications of the tariff and is considering diplomatic efforts to address the situation. Officials have acknowledged the challenges but do not see this development as a major setback. Instead, they are exploring negotiations and alternative trade measures to mitigate the impact. While the tariff increase is a setback for Indian exporters, it also underscores the broader trade tensions between the U.S. and India, highlighting the need for continued diplomatic dialogue and trade negotiations to resolve disparities and maintain a stable economic relationship.

According to Dibyanshu Tripathi, CEO and Co-founder of Hexalog, “The overall tariff imposed on India remains lower than most other Asian countries, and within India’s import structure, only a handful of categories face tariffs exceeding 50% when importing from the U.S. This positions India more favorably compared to its regional counterparts.While only a few categories are expected to be significantly impacted, India retains a competitive edge in several key sectors.”

He further adds, “At the same time, the evolving diplomatic messaging between India and China in the backdrop of India-U.S. trade relations is worth monitoring. Certain industries, like pharmaceuticals, are well-insulated, while sectors such as jewelry exports may face challenges. Ultimately, this measure is expected to reduce the U.S.-India trade deficit from $46 billion to the range of $35-40 billion. However, there could be a marginal impact on India’s GDP, with an estimated 30-basis-point adjustment.