US reciprocal tariffs and their impact on key Indian sectors
Updated: Apr 3rd, 2025
As US President Donald Trump announced sweeping reciprocal tariffs on several trading partners, including India, different Indian export sectors are facing varying levels of additional duties.
While some industries are bracing for higher costs, others have received exemptions, providing a mixed impact on India’s trade relationship with the US
Sector-wise breakdown of tariffs
Pharmaceutical industry
The Indian pharmaceutical industry has received a significant reprieve, with the White House confirming that these exports will not be subject to Trump’s new tariffs.
Given that India supplies over 31.5% of its pharmaceutical exports to the US and is a key player in the generic drugs market, the exemption prevents a potential price surge in the American healthcare system.
Indian generics saved the US an estimated $219 billion in 2022 alone, making them too vital to tax.
Gems & Jewellery
India’s gems and jewellery sector, a key contributor to exports, has been hit with a 26% tariff under the new US trade policy.
This is a major setback, considering the US is one of the biggest buyers of Indian diamonds and jewelry. The additional cost burden could impact demand, making Indian exports less competitive against rivals like Thailand and Israel.
Textiles, Footwear, and Electronics
Indian textile, footwear, and electronics exports to the US will now face a uniform 26% tariff. However, trade experts suggest that despite the higher duty, India’s position could still strengthen in the global sourcing landscape.
Countries like Vietnam, Cambodia, and Thailand are seeing steeper tariff increases (10–20 percentage points higher), giving India a competitive edge in post-China+1 supply chain realignments.
Auto components, Chemicals
These industries will also be subject to the 26% tariff, but India’s cost competitiveness over China, which now faces an overwhelming 54% effective tariff, offers some buffer. Experts believe that India’s resilient manufacturing base will allow it to mitigate losses in these sectors.
Copper, Semiconductors, Lumber, Bullion, and Energy
In addition to pharmaceuticals, Indian exports of copper, semiconductors, lumber, bullion, and certain essential minerals have also been spared from the tariff hikes.
The White House cited the non-availability of these resources in the U.S. as the reason for the exemption, ensuring continued trade flow in these critical sectors.
Economic and trade implications
Sanjay Nayar, President of Assocham – Associated Chambers of Commerce and Industry of India, emphasised that while India’s exports to the US will be affected, the country stands to fare better than some of its global peers.
“Net-net, it appears India’s export competitiveness to the US market stands far less impacted on a relative basis. Yet, our industry should make concerted efforts to increase export efficiency and value addition to mitigate the impact of these tariffs,” he stated.
Arsh Mogre, an economist at PL Capital Institutional Equities Research, added that the tariffs mark a shift towards bilateral trade deals rather than multilateral agreements. “This is less an act of protectionism and more a high-stakes gambit in trade negotiations,” he observed.
The immediate impact on India’s US-bound exports, valued at $75–78 billion annually, is non-trivial. However, with strategic policy moves, including a potential preferential trade deal with the US, India may find ways to navigate these tariffs while securing long-term trade benefits.
(With inputs from syndicated feed)
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