India is bracing for a tough challenge in global trade as US President Donald Trump prepares to enforce his new ‘reciprocal tariffs’ policy from April 2. With a 25% tariff already put on aluminium and steel—though these accounted for under 2% of India’s exports to the US—concerns are mounting over the broader implications for industries ranging from gems and jewellery to pharmaceuticals and automobiles. The move threatens billions of dollars in exports, posing risks to businesses, jobs, and economic growth.
As Trump intensifies his tariff policy, the pressing question remains: How severe will the impact be on India?
During a joint session of the US Congress, Trump highlighted how other countries, including India, have imposed high tariffs on US imports for years. He pointed out that India levies tariffs exceeding 100% on auto imports, calling for trade fairness through his reciprocal tariffs system. While Canada, Mexico, and China have already faced similar measures, India had largely been spared—until now.
How will it impact Indian exports?
Economic analysts believe India is particularly vulnerable to the new tariff regime. Some reports suggest that India’s tariff gap with the US is quite wide, meaning India imposes much higher import duties on American goods than vice versa. Some bank reports highlight that India’s import tariffs on US products are, on average, more than 10 percentage points higher than what the US imposes on Indian exports. If Washington moves to close this tariff disparity, India could face serious consequences. However, the action from the US side is that business-oriented Trump administration is more focused on their economic interests under the MAGA campaign rather than hurting Indian interests.
Analysts’ estimates suggest that India may see their tariffs increase by 4 to 6 percentage points under Trump’s new policy. This could be a significant blow to Indian exporters, particularly those in automobile, pharmaceutical, and chemical industries.
According to the US National Trade Estimate Report (NTER) 2023, India’s average Most-Favored-Nation (MFN) applied tariff rate stood at 18.3% in 2021—the highest among major global economies. For non-agricultural goods, India’s applied tariff rate averaged 14.9%, while agricultural goods were hit with a staggering 39.2% tariff. This is really high when compared to other nations.
India also maintains some of the highest bound tariff rates globally, averaging 113.1% on agricultural products, with peaks reaching up to 300%. The NTER report highlighted several specific Indian tariffs, including:
Vegetable oils: Up to 45%
Apples, corn, motorcycles: 50%
Automobiles, flowers: 60%
Natural rubber: 70%
Coffee, raisins, walnuts: 100%
Alcoholic beverages: 150%
Moreover, India enforces high basic customs duties on several imported drug formulations, including life-saving medicines, which, in some cases, exceed 20%.
Potential loss due to Reciprocal Tariffs
The new tariffs have brought anxiety among Indian exporters, especially in the automobiles, chemicals, and jewellery sectors. A Citi Research report estimates that India could suffer an annual loss of around $7 billion due to these tariffs.
The most affected industries would be:
Chemicals, metal products, jewellery (most impacted)
Automobiles, pharmaceuticals, food products (moderate impact)
India’s total exports to the US were valued at approximately $74 billion in 2024. Among the key export items were:
Pearls, gems, and jewellery: $8.5 billion
Pharmaceuticals: $8 billion
Petrochemicals: $4 billion
Meanwhile, US exports to India were worth around $42 billion in 2024, already subject to higher Indian tariffs, such as:
7% tariffs on wood products and machinery
15-20% tariffs on footwear and transport equipment
68% tariffs on certain food products
A White House fact sheet reveals that the US imposes an average MFN tariff of just 5% on agricultural products, while India’s rate for the same stands at 39%. If Washington enforces reciprocal tariffs on farm goods, India’s agricultural exports may be hit hardest.
It is expected that India’s exports to the US may decline by $2 billion to $7 billion in the financial year 2025-26 due to Trump’s tariff changes. Between April and December 2024, India’s exports to the US grew by 5.57% to $59.93 billion, but imports from the US increased by 1.91% to $33.4 billion. The new tariffs potentially dent India’s growth trajectory.
India has already taken steps to ease trade tensions. New Delhi has reduced tariffs on certain American imports, including:
High-end motorcycles: Reduced to 30% from 50%
Bourbon whiskey: Reduced to 100% from 150%
Additionally, India has ramped up energy imports from the US and increased its defence equipment purchases. The two nations are also negotiating a Bilateral Trade Agreement (BTA), which is expected to be finalized by late 2025.
The pharmaceutical sector of India is strong and deeply ingrained in the US market. Hence, the pharmaceutical sector may not be impacted much, given that it may be seen as a necessity for the US. While tariff differentials on textiles are modest, India has a significant market share in US imports of various types of textiles. Hence, the tariff is not only going to dent India but also hurt US citizens’ pockets. Due to a new tariff on Indian goods, US citizens feel pain in their pockets, which may cause surge in inflation in the US market. The upcoming month will show the exact effect of these reciprocal tariffs.
