India’s trade dynamics with the United States are poised for a significant shift, with projections indicating a potential decline of $5.76 billion in merchandise exports by 2025. This decline, amounting to approximately 6.41%, is attributed to the recent imposition of elevated tariffs by the Trump administration, as detailed in a report from the Global Trade Research Initiative (GTRI). Key sectors such as gems and jewelry, marine products, electronics, and auto parts are expected to feel the most impact.

Understanding the Tariff Implications

The GTRI’s analysis, leveraging trade data from 2024, reveals that nearly 75% of the $89.81 billion worth of goods exported from India to the US last year will now be subjected to a 26% duty. This replaces the previously lower most-favored nation (MFN) tariffs.

• Energy products like petroleum and solar panels, along with pharmaceuticals, will remain exempt from these new tariffs.
• The overall strategy aims to align import duties with reciprocal market access, which poses a challenge for Indian exporters.

Sector-Specific Forecasts

The economic landscape is changing dramatically, and as noted by Ajay Srivastava, co-founder of GTRI, “While the overall impact might seem small, it will vary significantly across different sectors.”

Major Affected Industries

• Seafood Exports: India’s seafood sector is among the hardest hit, with exports of frozen fish and shrimp facing a 20.2% decline, equating to a $404.3 million loss.
• Jewelry and Precious Stones: Exports worth $11.9 billion last year are projected to fall by $1.82 billion due to increased tariffs on gold jewelry and polished diamonds.
• Electronics: The electronics sector, which saw exports soar to $14.4 billion, could experience a drop of $1.78 billion as new tariffs squeeze profit margins.

Other Key Sectors

• Fish and Crustaceans: Expected to drop 20%.
• Iron and Steel Products: Projected to decrease by 18%.
• Auto Parts and Electronics: Anticipated to shrink by more than 12% each.

Adaptation and Future Prospects

The report emphasizes that while the immediate outlook appears challenging, there are opportunities for adaptation. Vipul Shah, former chairman of the Gem and Jewellery Export Promotion Council, remarked, “The diamond industry, like many others, must innovate and pivot to sustain growth amidst these economic shifts.”

• Textiles and Garments: Surprisingly, despite higher tariffs, India may still gain market share in textiles as competitors face steeper increases.
• Pharmaceuticals: This sector remains a bright spot with continued zero-duty MFN access, projecting a 2.1% growth in exports.

Conclusion

India’s merchandise exports to the US have been on a growth trajectory, reaching $78.3 billion in FY23. Although a dip to $77.5 billion in FY24 occurred due to supply chain disruptions, the long-term outlook remains optimistic. As exporters adjust to the new tariff landscape, the potential for resilience and growth persists, underscoring the importance of strategic adaptations in a rapidly evolving global trade environment.

For further insights on trade policies and their implications, explore resources from the GTRI and related trade organizations.