Donald Trump's 25% tariff to hit India's exports! Which sectors are at maximum risk? Top 5 points to know
How will Donald Trump's 25% tariffs hit India? Which sectors are the most vulnerable? As stalemate on trade deal talks continues, US President Donald Trump has imposed a 25% tariff on India with the threat of additional penalty for India's arms and oil trade with Russia.
The additional penalty has not yet been announced. The new tariff rate is effective from August 1, 2025.
On Wednesday, Trump criticised India's trade practices on the Truth Social platform, calling its tariffs "among the highest in the World", and that the country imposes "the most strenuous and obnoxious non-monetary Trade Barriers of any Country."
India's expectations for favourable treatment compared to regional competitors, seem to have dimmed for now despite being one of the earliest nations to initiate trade discussions with Washington following Prime Minister Narendra Modi's significant White House visit in February.
For comparison, Vietnam faces 20% tariffs, Indonesia 19%, and Japan 15%.
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According to a Bloomberg report, internal Indian calculations suggest that if tariffs exceed 25%, approximately 10% of total Indian exports would be affected from July to September. The bilateral trade between India and the US reached $129.2 billion in 2024.
Donald Trump's 25% tariffs: Which sectors will be hit badly?
The ultimate effect on Indian industries will vary depending on how the tariffs compare with those imposed on competing nations.
Whilst specific sectoral tariff rates and penalty levels remain unclear, several industries are particularly vulnerable to significant impacts.
The higher than expected rate is expected to impact various sectors including electronics manufacturing, generic pharmaceuticals, jewellery and automotive components.
Indian Refiners
Government-owned refineries including Indian Oil Corp Ltd., Bharat Petroleum Corp Ltd.
and Hindustan Petroleum Corp Ltd., alongside private sector companies such as Reliance Industries Ltd. face potential adverse effects from the implementation of new tariffs.
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Russian oil constitutes approximately 37% of India's total oil imports. These imports, purchased at below-market prices, have significantly supported gross refining margins. The unavailability of Russian crude would result in increased import costs, subsequently affecting the refiners' profitability.
Reliance had established an agreement to purchase up to 500,000 barrels daily from Russia in the current year, positioning itself as India's primary importer of Russian crude.
Gems & Jewellery
The newly imposed tariff has raised serious concerns, said India's Gem and Jewellery Export Promotion Council in a statement late Wednesday, calling it a "deeply concerning development" that risks disrupting vital supply chains and endangering numerous jobs, particularly affecting the gems sector "severely impacted".
According to the Bloomberg report, the trade group highlighted that Indian exports to the US in this sector exceed $10 billion, and implementing a comprehensive tariff would "inflate costs, delay shipments, distort pricing, and place immense pressure on every part of the value chain", affecting everyone from labourers to major manufacturing units.
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Electronics
India has emerged as the leading supplier of smartphones to the US market, surpassing China, following Apple Inc.'s
decision to increase iPhone assembly operations in the South Asian nation. However, this position could become vulnerable due to the recent tax implementation.
"Apple's US iPhone sourcing strategy from India to circumvent China tariffs could be meaningfully set back if tariffs in India extend to 25%," Bloomberg Intelligence analysts Anurag Rana and Andrew Girard wrote in a note July 30. "A 25% surcharge would most likely force Apple to revise this plan."
Pharmaceuticals
India dominates the US market for generic medications, exporting non-patented drugs worth approximately $8 billion annually. Leading pharmaceutical firms from India, including Sun Pharmaceutical Industries Ltd., Dr. Reddy's Laboratories Ltd., and Cipla Ltd., derive over 30% of their earnings from US operations.
According to IQVIA data, Indian pharmaceutical companies fulfilled 40% of all US prescriptions in 2022.
These Indian-manufactured medicines generated substantial cost reductions for the US healthcare system, delivering savings of nearly $220 billion in 2022 alone, whilst accumulating total savings of $1.3 trillion over the ten-year period ending 2022.
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Textile and Apparel Industry
Indian manufacturers of home textiles, clothing, and footwear are integral suppliers to major American retail corporations, such as The Gap Inc.,
Pepe Jeans, Walmart Inc. and Costco Wholesale Corp. Previously, India had requested preferential tariff rates compared to competitors like Vietnam to gain a competitive edge in this sector.
The Confederation of Indian Textile Industry has expressed significant concerns about this situation in their official statement. "It will seriously test the resolve and resilience of India's textile and apparel exporters as we will not enjoy a significant duty differential advantage."
Several prominent companies face potential setbacks. Vardhman Textiles Ltd., a supplier to numerous US firms, reported reduced American business activity during their earnings call this month, citing tariff uncertainties. Companies including Welspun Living Ltd., Indo Count Industries Ltd. and Arvind Fashions Ltd. are likely to experience similar competitive disadvantages.
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