U.S. President Donald Trump’s warning of imposing reciprocal tariffs starting in early April has raised concerns across India’s export sectors, spanning from automobiles to agriculture. Analysts at Citi Research project that these tariffs could result in annual losses of approximately $7 billion for India.
Government officials are currently awaiting details on how the tariffs will be calculated before fully assessing their economic impact. However, they are preparing strategies to counter them and working on a trade proposal aimed at reducing tariffs while enhancing bilateral trade with the United States.
Sectors at Risk
According to Citi analysts, India’s most vulnerable industries include chemicals, metal products, and jewellery, followed by automobiles, pharmaceuticals, and food products.
India’s merchandise exports to the U.S. in 2024 were estimated at nearly $74 billion. Among these, pearls, gems, and jewellery accounted for $8.5 billion, pharmaceuticals contributed $8 billion, and petrochemicals were valued at around $4 billion.
Overall, India imposed a weighted average tariff of approximately 11% in 2023, which was about 8.2 percentage points higher than the tariffs the U.S. applied to Indian exports, according to Citi estimates.
U.S. Exports to India
In 2024, U.S. manufacturing exports to India were worth nearly $42 billion and faced significantly higher tariffs. These ranged from 7% on wood products and machinery to 15%-20% on footwear and transport equipment. Food items faced the steepest tariff, reaching nearly 68%.
A White House fact sheet released last week highlighted the tariff discrepancies, stating that the U.S. applied an average Most Favored Nation (MFN) tariff of 5% on agricultural goods, whereas India’s average MFN tariff on such products stood at 39%.
Additionally, the U.S. criticized India for imposing a 100% tariff on American motorcycles, while the U.S. levied only a 2.4% tariff on Indian motorcycles.
Agriculture Sector
India’s agriculture and food exports, which have the highest tariff differentials despite relatively low trade volumes, could face significant setbacks if the U.S. chooses to extend reciprocal tariffs to a wider range of farm products.
Textile, Leather, and Wood Products
The textile, leather, and wood product industries, which are labor-intensive, face relatively lower risks due to smaller tariff gaps and their limited share in U.S.-India trade.
Moreover, many American companies manufacture these products in South Asia, benefiting from India’s free trade agreements. This allows them to sell their products in the Indian market at reduced tariffs.
Worst-Case Scenario
Economists at Standard Chartered Bank estimate that in a worst-case scenario—where the U.S. imposes a uniform 10% tariff hike on all Indian imports—India’s economy could experience a decline of 50 to 60 basis points. This projection assumes an 11%-12% drop in Indian exports to the U.S.
India’s Response
To ease trade tensions, India has already reduced tariffs on several goods. For instance, it lowered tariffs on high-end motorcycles from 50% to 30% and slashed duties on bourbon whiskey from 150% to 100%. Furthermore, India has pledged to reassess other tariffs, increase energy imports, and purchase more defense equipment in an effort to address U.S. trade concerns.
