India’s Trade Resilience Amidst US Tariff Hikes
India’s exports to the United States, which account for nearly a third of the country’s outbound shipments in crucial sectors such as electronics, pharmaceuticals, gems, jewellery, and textiles, may remain resilient despite Washington’s recent imposition of higher tariffs. According to trade experts and a Moneycontrol analysis, while the US tariffs will impact all countries, Indian exporters in select industries, such as electronics and pharmaceuticals, could gain ground as competitors like China and Vietnam face significantly steeper duties.
The United States announced a 26% reciprocal tariff on Indian imports on April 3, setting the rate in response to what it calls “unfair trade practices.” President Donald Trump had already imposed a 10% blanket tariff on global imports, with additional levies on specific nations. While China, India’s biggest trade competitor, faces a 54% duty, Vietnam is subjected to a 46% tariff, making Indian exports relatively more competitive in some sectors.
-
India’s exports to the US span key industries such as electronics, pharmaceuticals, and textiles.
-
Higher tariffs on China and Vietnam could help India’s exports gain a competitive edge.
-
The 26% tariff on India is lower than the 54% levied on China, which may mitigate some trade disruptions.
Electronics Sector: Balancing Impact and Opportunity
India’s electronics exports to the United States reached $12.6 billion in 2024, making up 31% of the country’s total electronics exports. Although the new tariffs will increase costs, India stands to benefit as China, which dominates US electronics imports with an 83% market share, faces a much harsher 54% tariff. This could redirect some US electronics demand towards Indian manufacturers, particularly in categories where China holds a monopoly.
The tariff impact will be moderate as certain electronic products, including semiconductor chips, are exempt from the US levies. Given India’s focus on expanding its domestic electronics manufacturing through the Production-Linked Incentive (PLI) scheme, companies may be able to adjust their pricing to retain their foothold in the US market.
-
India’s electronics exports to the US totaled $12.6 billion in 2024, accounting for 31% of its overall electronics exports.
-
China, the dominant player in US electronics imports, faces a 54% tariff, opening opportunities for Indian manufacturers.
-
Semiconductor chips and some other high-tech electronic items have been exempted from tariffs.
Pharmaceuticals: Limited Exposure Due to Exemptions
India’s pharmaceutical exports to the US stood at $8.87 billion in 2024, representing 38% of India’s total pharma exports. The sector appears well-positioned to weather the tariff storm, as Washington has largely exempted pharmaceutical products from reciprocal tariffs. This move aligns with the US government’s priority of ensuring affordable access to essential drugs, many of which are supplied by Indian generic drug manufacturers.
India’s pharmaceutical industry relies heavily on the US market, with major companies such as Sun Pharma, Dr. Reddy’s Laboratories, and Cipla generating substantial revenue from American sales. With exemptions granted to critical drugs and active pharmaceutical ingredients (APIs), the impact on India’s pharma sector is expected to be minimal, and in some cases, even positive.
-
India’s pharma exports to the US totaled $8.87 billion in 2024, accounting for 38% of the country’s total pharma exports.
-
Pharmaceuticals have been largely exempted from the new US reciprocal tariffs.
-
Major Indian drug manufacturers are expected to maintain their US market presence with minimal disruptions.
Gems and Jewellery: A Sector Under Pressure
Unlike pharmaceuticals, India’s gems and jewellery exports are set to be significantly affected by the tariff hikes. The US is India’s largest export destination for gems and jewellery, accounting for $9.3 billion or 31% of the country’s total sectoral exports. With new duties of up to 20% on loose diamonds and 5.5%-7% on gold jewellery, Indian exporters face an uphill battle in retaining their market share.
The Indian jewellery industry, which employs millions and operates on a fine balance of labor costs and global demand, could see a dip in orders from American buyers due to increased costs. While the US remains a key market, some jewellery exporters may seek alternative markets in Europe and the Middle East to offset potential losses.
-
India’s gems and jewellery exports to the US reached $9.3 billion in 2024, accounting for 31% of total exports in the sector.
-
New US tariffs include up to 20% duties on loose diamonds and 5.5%-7% on gold jewellery.
-
Exporters may explore alternative markets to counter declining demand from the US.
Textiles and Apparel: Challenges and Growth Potential
Textiles and apparel exports from India to the US amounted to $2.95 billion and $2.59 billion, respectively, with textiles having a high dependency of 48.8% on the American market. While higher tariffs may create challenges, India could also benefit from US tariff hikes on competitors like Bangladesh and Vietnam, both of which rely heavily on textile exports to the US.
India’s garment manufacturers could gain a competitive edge in select product categories, especially as global brands seek to diversify supply chains to mitigate risk. However, cost-sensitive buyers may shift sourcing to lower-cost regions, posing a challenge for Indian exporters.
-
India’s textile exports to the US stood at $2.95 billion, with a 48.8% dependence on the US market.
-
Higher tariffs on Bangladesh and Vietnam could open opportunities for Indian textile manufacturers.
-
Cost-sensitive buyers may explore alternative sourcing options, potentially impacting India’s export share.
Machinery, Vehicles, and Other Key Exports: Mixed Reactions
Machinery and mechanical appliances, valued at $6.57 billion in exports to the US, will likely face headwinds due to the 26% tariff. Similarly, vehicles and auto components, which contribute $2.66 billion to India’s exports, will see increased costs, making Indian products less competitive against lower-duty nations.
On the other hand, mineral fuels ($4.46 billion) and organic chemicals ($2.58 billion) may experience a relatively positive impact, as select categories have been exempted or face moderate duties. The overall effect on these industries will depend on how global trade partners respond to the US tariff changes and whether Indian exporters can navigate the new cost structures effectively.
-
India’s machinery and mechanical appliances exports to the US totaled $6.57 billion, with a negative impact expected due to higher tariffs.
-
Vehicles and auto components, valued at $2.66 billion, may become less competitive in the US market.
-
Mineral fuels and organic chemicals exports could see limited or positive impacts due to partial tariff exemptions.
