How Trump's Tariffs Will Hit Indian Industries While pharmaceutical and energy products have been spared, industries like automobiles, metals, and manufacturing face significant challenges

USA President, Donald Trump's, latest round of reciprocal tariffs is sending ripples through global trade, and India is far from immune. With nearly $14 billion worth of electronics exports and over $9 billion in gems and jewelry trade on the line, multiple sectors will feel the heat. While pharmaceutical and energy products have been spared, industries like automobiles, metals, and manufacturing face significant challenges. Here's how different sectors in India stand to be affected:

Electronics

India's electronics sector, particularly manufacturing, faces turbulence as the U.S. hikes tariffs. However, India may find an opportunity amid the chaos. Ashok Gupta, chairman of Optiemus Infracom, sees a competitive advantage emerging: "We believe the tariff announcement can present a competitive opportunity in electronics manufacturing because India has an advantage over tariff rates compared to other electronic manufacturing hub countries. This difference can create a significant competitive advantage and give India a better chance to catch up in making India a preferred destination for electronics manufacturing for global companies." While some cost pressures will arise, India's lower comparative tariffs make it a more attractive production hub for firms looking to sidestep the worst of Trump's trade measures.

Gems and jewelry

Indian gems and jewelry exports to the U.S. face the stiffest challenges under the new tariff regime. Previously subjected to an average tariff of just 2.12 per cent, the sector now contends with steep price increases, likely leading to reduced competitiveness. Since Indian jewelers rely heavily on American consumers, a decline in demand could lead to job losses and revenue cuts. The industry, which has historically been resilient, may have to explore alternative markets or invest in branding and value addition to maintain its edge.

Automobile

The automobile sector, already struggling with global supply chain disruptions, now faces a fresh obstacle. Though the 26 per cent tariff will not apply to auto parts, a 25 per cent duty remains on aluminum and steel. This move weakens the price advantage Indian auto exporters held over competitors. Sunil Kharbanda, co-founder & chief revenue officer,Trezix, highlights the financial blow stating, "The announcement of a 26 per cent 'discounted' reciprocal tariff on Indian automobile exports by the U.S. signals a serious, though moderated, trade action. With Indian auto exports to the U.S. valued at over $1.5 billion annually, this move could lead to a $400–500 million impact through reduced price competitiveness, thinner margins, and possible order losses." Indian manufacturers may now seek to expand into alternative markets to counterbalance the revenue decline.

On the other hand, Saurabh Agarwal, partner & automotive tax leader, EY India highlights the silver lining for the booming EV industry in India. "With US automotive tariffs rising, India's electric vehicle sector has a prime opportunity to capture a larger share of the US market, especially in the budget car segment. China's 2023 auto and component exports to the US stood at $17.99 billion, while India's were only $2.1 billion in 2024, highlighting the potential for growth. To accelerate this, the government should enhance the PLI scheme by including more auto components, opening it to new players, and extending it by two years."

Metals and manufacturing

While auto parts and aluminum products escaped the 26 per cent tariff, they still fall under the previously announced 25 per cent duty. This increases production costs for Indian manufacturers that rely on these materials for exports. The broader manufacturing sector will face similar challenges as businesses grapple with rising input prices. Vikram Kasat of PL Capital warns of potential global economic downturns stating, "Large tariff shocks threaten U.S. and global recession. If these policies are sustained, they would likely push the U.S. and global economy into recession this year." The key for Indian manufacturers will be cost optimization and securing diversified trade agreements.

Pharmaceuticals

For now, India's $9 billion pharmaceutical exports to the U.S. have been exempt from additional tariffs. This is a relief for the sector, given its crucial role in supplying affordable generics to the American market. However, experts warn that future sector-specific tariffs could still be introduced. Trideep Bhattacharya, president & chief investment officer, Edelweiss MF, explains, "Relief for now has no incremental adverse impact on large exporting sectors like IT services, Pharma, and Autos, but increases recession-related fears in the U.S. over time." The industry must stay prepared for possible policy shifts that could disrupt current advantages.

The broader impact

Beyond individual sectors, the overall impact of Trump's tariffs on India's GDP is estimated around 0.4 per cent. While India remains relatively better off than Asian peers like China and Vietnam, the risk of further economic instability looms. Vineet Agrawal, co-founder of Jiraaf, notes, "The reciprocal tariff is higher than expected, however, the silver lining for India is that it remains on the lower end when compared with China, Vietnam, Bangladesh, and Thailand. As early reactions from Australia, South Korea, and China suggest, there would be measures that impacted countries would take to reverse the impact of globalization and impact global trade flows."

Trump's protectionist push has raised inflation fears in the U.S. and heightened recession risks worldwide. As Nitin Rao, CEO of InCred Wealth, puts it, "Markets will have to price this in, both in terms of sentiment and earnings. Volatility would continue, but at some point, it will result in sharp falls over a few days, which may give good buying opportunities in a new economic order for high-risk investors." For Indian businesses, adaptability is key. The only question looms is that can India turn these challenges into opportunities or will it suffer setbacks amid the shifting global trade order?