Impact of US Tariffs on Indian Industry and Opportunities for Key Sectors

Original Published Date on Medium: May 13th, 2025

Reference: https://medium.com/@virikajuneja/impact-of-us-tariffs-on-key-indian-sectors-8123ea537bbd

Liberation Day Tariff Imposition

Starting “Liberation Day” on April 2nd, 2025, the US Administration imposed reciprocal tariffs on 50+ countries ranging from 10% to 49%, including on India. Although there is a 90 day pause on imposing these higher tariffs, this article analyzes the impact and opportunities to key sectors. US imposed these higher tariffs to level the playing field against nations providing subsidies or manipulating currencies for cheaper exports to the US or imposing high tariffs on US imports. The tariffs aim to protect and prioritize US industries and growth against nations that put up trade barriers. Last year, the average tariff was 2.5%.

Indian Exports to the US and Key Sectors Impacted

Exports to the US form the largest share of India’s exports — around 18% or $80 billion in 2023–24. The reciprocal tariff levied on India is 26%, which is discounted to India’s base tariff of 52% on US goods. Key sectors impacted include Steel, Aluminium, Smartphones, Gems and Jewellery, Apparels, Auto Parts and Petro-Chemicals. IT and Pharma remain exempt for higher tariffs.

Steel and Aluminium

India’s share of Steel ($12 billion) and Aluminum ($950 million) exports to the US constitutes only around 5% of its total Steel and Aluminum exports. These exports are diversified among India’s other trading countries. Higher tariffs risk domestic dumping and oversupply. This would put downward pressure on prices and reduce exports. Diversification of export markets and catering to domestic demand growth could help offset losses from the US market.

Textiles and Apparel

India exported $10.5 billion of Textiles and Apparel products to the US in 2024 or around 30% its total such exports. India can capture US market share from Bangladesh and China as both have been hit by higher tariffs than India. India could leverage this opportunity by executing reforms and such training manpower. Other challenges include lower labour pricing (around 20%) in Bangladesh.

Smartphones

US has exempted Smartphones from tariffs. However, there is a global trend to diversify supply chains away from China after Covid-19 lockdowns. It is generally referred to as the China + 1 strategy. Around 14% of US phone imports come from India. India has seen a huge mobile phone export growth in 2024–25 of 55%. In order to fully leverage these opportunities, India must enhance its ease of doing business, maintain policy stability, invest in logistics, infrastructure and new manufacturing assemblies.

Footwear

India’s exported $22 million worth of Footwear to the US in 2023–24. It accounted for around 18% of total exports. The industry grew by 55% annually. Higher tariffs can lead to a decline in footwear exports by upto 6%. On the flip side, India’s footwear imports to the US only constitutes 5% of it’s total footwear imports. India has a lower cost base in footwear manufacturing as compared to Vietnam ($0.9/hour vs $2/hour). This cost advantage can be passed onto customers. Indian manufacturers can diversity more into non-leather footwear products. The manufacturing capacity can be diversified further via joint ventures. Direct-to-Consumer models can also be explored as an alternate means to bypass big retailers in the US.

Gems and Jewellery

In 2024, India exported around $10 billion of Gems and Jewellery to the US, which was 30% of all exports. US in the largest importer of Indian gems and jewellery. Indian duties can be lowered to mitigate the effect of higher tariffs.