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Diamond, shrimp, home textiles to be hardest hit by US tariffs: Crisil
The US administration currently levies a 25 per cent tariff on Indian imports. An additional 25 per cent tariff — to take effect two weeks from now as a penalty for India's purchase of Russian crude oil — will take the cumulative additional tariff to 50 per cent.
For other sectors such as ready-made garments (RMG), agrochemicals, specialty chemicals, and capital goods, the impact of the 25 per cent reciprocal tariff is likely to be more manageable, given moderate US exposure of 5–20 per cent of overall revenue, and a limited tariff disadvantage that may allow companies to partly pass on the impact to customers.
'Additionally, the move to impose an additional 25 per cent tariff with effect from August 27, 2025, as a penalty for importing crude oil from Russia, will make Indian exports to the US unviable for the aforesaid (diamond polishing, shrimp, home textiles, and carpets) as well as other sectors including RMG, chemicals, agrochemicals, capital goods, and solar panel manufacturing, which have sizable trade exposure to the US,' Crisil said.
The 25 per cent reciprocal tariff that came into force on August 7 is higher than that faced by most of India's Asian competitors. Sectors such as diamond polishing, shrimp, and home textiles may see sales volumes decline due to heavy reliance on US trade, while costs will rise due to partial absorption of tariffs, affecting earnings.
The extent of the impact will vary depending on sectoral exposure, the ability to pass on incremental costs to customers, and relative tariff disadvantage versus competing nations. 'A potential second-order impact, including a slowdown in US demand and disparate tariffs across nations that could alter global trade dynamics, also warrants close monitoring,' the report said, adding that any potential trade agreement between India and the US in the coming days will bear watching.
However, strong corporate balance sheets, potential bilateral trade agreements with other countries, and possible Indian government support for impacted sectors could mitigate the credit impact to some extent, it added.
The US is India's largest trade partner and export destination. In FY24, India exported goods worth $86.5 billion to the US, accounting for a fifth of India's merchandise exports.
Sectoral Impact
Diamond polishing: Exports to the US accounted for about 25% of total revenue in FY25. The tariff will put more pressure on the sector's modest operating margins due to reduced fixed-cost coverage and the need to bear higher tariff costs. US retailers have shown limited willingness to absorb the additional burden.
Shrimp: The US accounts for about 48% of revenue for Indian shrimp exporters. India is now one of the highest-taxed major shrimp exporters to the US due to reciprocal tariffs, countervailing duties, and anti-dumping duties. Operating margins will be further eroded due to additional costs and limited pass-through ability, given stiff competition from Ecuador, which benefits from lower tariffs.
Home textiles and carpets: Exports account for 70–75% and 65–70% of total sales, respectively, for these sectors. Of this, the US accounts for about 60% of exports for home textiles and about 50% for carpets. While India currently enjoys some tariff advantage against China, the reciprocal tariff will lead to a material decline in revenue and profits, given the limited ability to pass on higher costs for these discretionary products.
RMG: Exports to the US form 10–15% of total revenue and will become completely unviable as the tariff structure will be significantly higher than that of competing manufacturers in China and Vietnam.
Agrochemicals: Exports to the US account for 11–12% of sector revenue and will face challenges, with China as a key competitor. The ability to divert products to alternative markets such as Latin American countries will be limited by strong Chinese competition in those regions.
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