What does Trump’s tariff mean for Indian exports? Deloitte explains
On expected lines, US President Donald Trump announced sweeping tariffs against over 180 countries on April 2, dealing a blow to market sentiment. Apart from country-specific tariffs, Trump also announced the imposition of a 10 per cent baseline tariff.
Trump announced a 26 per cent tariff on India, half the rate that India charges on US imports.
However, according to global financial firm Deloitte, Indian exporters face the prospect of a significantly higher ad valorem (according to value) duty of 27 per cent with effect from 9 April. Sectors such as textiles and apparel, pharmaceuticals and active pharmaceutical ingredients (APIs), Information technology and electronic components, agricultural products and automobiles are likely to be significantly affected.
“The US will impose a blanket 10 per cent additional ad valorem duty on all imports, except specified commodities, effective 5 April 2025. Furthermore, higher differentiated country-wise reciprocal tariffs on specified countries, including India, will come into effect from 9 April 2025. Accordingly, the additional ad valorem reciprocal tariff shall increase from 10 per cent to 27 per cent on imports from India,” said Deloitte.
Deloitte expects India to push for a quicker conclusion of the proposed bilateral trade agreement, using the tariff hike both as a bargaining tool and an opportunity to discuss broader economic issues.
“Tariff alignment, digital trade facilitation and mutual recognition of standards could form the bedrock of this re-engagement. India can explore the provisions under the executive order, such as tariff modifications based on cooperative steps as an option to engage with the US authorities,” said Deloitte.
Impact on Indian exports
Deloitte said that Indian exporters face the prospect of a significantly higher ad valorem duty of 27 per cent with effect from 9 April 2025. The global financial giant underscored the following key sectors will likely be affected:
1. Textiles and apparel: According to Deloitte, India exported over $8 billion in textiles and garments to the US last year.
The financial firm believes with slim margins and high price sensitivity, even a 10–20 per cent increase in tariffs could make Indian goods uncompetitive compared to countries with lower reciprocal tariffs.
However, Deloitte pointed out that reciprocal tariff on apparel from Bangladesh (37 per cent), Sri Lanka (44 per cent) and Vietnam (47 per cent) may result in providing comparative advantage to India over other Asian competitors.
2. Pharmaceuticals: Deloitte said given India’s dominant share in generic exports to the US, any re-classification risk or origin tracing under US customs could create compliance hurdles.
Meanwhile, Trump has said that tariffs on pharma imports will come soon.
3. IT and electronic components: The reciprocal tariffs may have a negative impact on the competitiveness of Indian exports. However, India’s semiconductor exports to the US have been gaining attention due to their strategic importance in global supply chains, and notably, semiconductors have been exempted from the additional ad valorem duty in the US, said Deloitte.
4. Agricultural products: India exports fish, shrimps, non-basmati rice, vegetable extracts and oils to the US worth around $5 billion, which are likely to get impacted due to the 27 per cent reciprocal tariffs, said Deloitte.
5. Automobile: Deloitte pointed out that automobiles and auto components are mostly exempt from the additional ad valorem duty. However, they are also likely to be impacted as they have been covered under Section 232 proclamations dated 26 March 2025 and are subject to a 25 per cent tariff.
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Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions, as market conditions can change rapidly, and circumstances may vary.
