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US imposes 26% reciprocal tariff on Indian Exports; CareEdge
Industry News- Apr 07,25
While the 26% may seem restrictive, it is lower than tariffs imposed on the competitors—Vietnam (46%), Bangladesh (37%), China (34%), Taiwan and Indonesia (32%), and Pakistan (29%)—giving India a relative edge in key sectors.
In FY24, India exported goods worth $77.5 billion to the US while importing $42.2 billion, maintaining a trade surplus. Key export sectors included electronics, textiles, pharmaceuticals, gems & iewellery, agriculture, chemicals, and automobile parts.
However, the US has now imposed a uniform 26% reciprocal tariff on imports from India, up from the earlier average of 3.5%. While this may seem restrictive, it's comparatively lower than tariffs imposed on India’s competitors—Vietnam (46%), Bangladesh (37%), China (34%), Taiwan and Indonesia (32%), and Pakistan (29%)—giving India a relative edge in key sectors.
Sector-wise impact:
• Pharma: No immediate impact as it is exempt from reciprocal tariffs. Even if applied later, India’s competitive strength and strong FDA-approved manufacturing base could absorb the pressure.
• Electronics: Expected to be neutral. Despite the tariff, higher duties on China could make Indian exports more competitive. However, low value addition in smartphone manufacturing might lead to some relocation of production to the US.
• Textiles: Neutral to mildly positive. Competitors face higher tariffs, and India’s self-reliance in cotton aids cost absorption.
• Gems & Jewellery: Negative impact. The steep hike from 3.17% to 26% could hurt demand, especially for polished diamonds already challenged by lab-grown alternatives.
• Agriculture: Neutral overall, though Indian shrimp exporters may face pricing pressure from Ecuador, which enjoys a lower 10% tariff.
• Chemicals: Minimal impact, with potential benefits from higher tariffs on China. But risk of Chinese dumping in India and other markets could pose challenges.
• Automobiles & Parts: Limited impact, as exports to the US are low. OEMs in the US may not easily replace Indian suppliers, cushioning short- to mid-term effects.
While the tariffs signal a more protectionist stance by the US, India’s relatively lower tariff burden compared to peers could support its competitiveness in several key export categories. However, dumping risks and reduced discretionary spending could weigh on sectors like gems and chemicals.
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