From Gems to Pharma: US Tariffs Threaten India’s Top Exports—Who Pays the Price?
This move could significantly affect Indian exports, including gems, jewellery, pharmaceuticals, and automobiles, threatening billions of dollars in trade, jobs, and economic stability.
India is facing a major trade challenge as US President Donald Trump has decided to enforce reciprocal tariffs starting April 2. This move could significantly affect Indian exports, including gems, jewellery, pharmaceuticals, and automobiles, threatening billions of dollars in trade, jobs, and economic stability.
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Trump’s Hardline Stance on Tariffs
During a joint session of the US Congress, Trump justified the decision, stating that other nations, including India, have imposed high import duties on American goods for years. He specifically pointed out India’s 100% tariffs on auto imports, calling the new system a fair trade initiative.
Previously, countries like Canada, Mexico, and China faced US tariffs, while India remained largely unaffected. However, this will change as the new tariffs will now be applied to all trading partners.
Also Read: China’s Bold Response to U.S. Tariffs: “Ready for War” Over Fentanyl Dispute
How Much Will India Lose?
Several economists believe that India is particularly vulnerable to these new tariffs. Reports indicate that India’s import tariffs on US goods are significantly higher than what the US imposes on Indian products.
- Deutsche Bank analysts estimate that India’s import tariffs on American goods are on average 10 percentage points higher than US tariffs on Indian products.
- Morgan Stanley predicts that India’s tariff rates could increase by 4-6 percentage points under the new US policy.
- Citi Research estimates that India could lose up to $7 billion annually due to these tariffs.
Industries at Risk
India’s total exports to the US were valued at $74 billion in 2024, with key affected industries including:
- Gems & Jewellery – $8.5 billion
- Pharmaceuticals – $8 billion
- Petrochemicals – $4 billion
- Automobiles, Chemicals & Food Products
Currently, American exports to India, worth around $42 billion, already face high import duties, including:
- 7% tariffs on wood & machinery
- 15-20% tariffs on footwear & transport equipment
- 68% tariffs on select food products
A White House fact sheet highlights that US farm goods face an average 5% tariff, while India’s tariffs on similar products are as high as 39%. If the US enforces reciprocal tariffs, India’s food and farm exports could take a major hit.
Impact on Indian Economy
A report by India Ratings and Research (Ind-Ra) warns that India’s exports to the US could decline by $2 billion to $7 billion in the financial year 2025-26 due to the new tariffs.
Between April and December 2024, India’s exports to the US rose by 5.57% to $59.93 billion, while imports from the US grew by 1.91% to $33.4 billion. However, with these new tariffs, India’s GDP growth could slow down by 5-10 basis points, according to Devendra Kumar Pant, Chief Economist at Ind-Ra.
Can India Negotiate a Solution?
India and the US aim to double their bilateral trade to $500 billion by 2030. Both nations are currently negotiating a Bilateral Trade Agreement (BTA), expected to be finalized by late 2025.
To ease tensions, India has already reduced tariffs on certain American goods:
- High-end motorcycles: Reduced from 50% to 30%
- Bourbon whiskey: Reduced from 150% to 100%
Additionally, India has increased energy imports and defense purchases from the US as part of its trade diplomacy efforts.
What’s Next?
With the April 2 deadline approaching, India faces mounting pressure to renegotiate trade terms and avert economic setbacks. Whether diplomatic talks can ease the impact of these tariffs remains to be seen, but for now, Indian exporters must brace for tougher times ahead.
