Understanding the Impact of Trump's Tariffs on Indian Exports: Insights from Deloitte

On April 2, 2025, President Donald Trump unveiled extensive tariffs affecting over 180 countries, stirring unease in global markets. Alongside a 10% baseline tariff, Trump specifically imposed a 26% tariff on Indian imports, which is notably lower than what India charges for U.S. goods. According to Deloitte, this move could lead to Indian exporters facing a staggering 27% ad valorem duty starting April 9, 2025.

Implications for Key Sectors

Trump’s tariff strategy is set to significantly impact various sectors, including textiles, pharmaceuticals, information technology, agriculture, and automobiles.

Textiles and Apparel: Last year, India exported over $8 billion worth of textiles to the U.S. The increase in tariffs poses a challenge, especially given the industry’s tight margins. A 10-20% tariff increase could render Indian textiles less competitive compared to nations with lower tariffs, such as Bangladesh and Sri Lanka.
Pharmaceuticals: With India being a major player in generic drug exports, any changes in classification or origin tracing could hinder compliance. Trump has indicated that tariffs on pharmaceutical imports are forthcoming, which has already resulted in a 6% slump in the Nifty Pharma index.
Information Technology and Electronics: While the new tariffs may dampen the competitiveness of Indian tech exports, the country’s semiconductor sector remains vital to global supply chains. Notably, semiconductors are exempt from the additional duties, offering some relief.
Agricultural Products: India’s exports of seafood, rice, and vegetable oils—valued at approximately $5 billion—are at risk due to the impending 27% tariffs.
Automobiles: Although many auto components are exempt from the new duties, they still fall under previous proclamations that could impose a 25% tariff.

Strategic Moves from India

In light of these developments, India is likely to expedite negotiations for a bilateral trade agreement, utilizing the tariff increases as leverage. Experts suggest that discussions could focus on:

Tariff alignment
Digital trade facilitation
Mutual recognition of standards

Deloitte emphasizes that India can leverage the executive order’s provisions to engage with U.S. authorities on potential tariff modifications based on cooperative measures.

Conclusion

The upcoming tariff changes herald a challenging period for Indian exporters, with sectors like textiles and pharmaceuticals facing substantial hurdles. As India navigates these waters, it will be essential to explore new avenues for trade engagement with the U.S. to mitigate the impact of these tariffs.

For more insights into the effects of tariffs on the market, check out our detailed analysis on the Indian stock market and its response to global trade changes.