US President Donald Trump’s threat to implement reciprocal tariffs starting in early April is raising concerns across India’s export sectors, from automobiles to agriculture. According to Citi Research analysts, potential annual losses could reach up to $7 billion.
Government officials, still awaiting details on how the tariffs will be calculated, are preparing countermeasures and working on a proposal for a trade deal with the US aimed at reducing tariffs and enhancing two-way trade. Lets explore the key impacts of reciprocal tariffs on India in this article.
Sectors at high risk
The most vulnerable sectors include chemicals, metal products, and jewellery, followed by automobiles, pharmaceuticals, and food products. India’s merchandise exports to the US, valued at nearly $74 billion in 2024, include pearls, gems, and jewellery ($8.5 billion), pharmaceuticals ($8 billion), and petrochemicals ($4 billion). In 2023, India imposed a weighted average tariff of 11%, roughly 8.2 percentage points higher than US tariffs on Indian goods.
US exports to India
US manufacturing exports to India, valued at $42 billion in 2024, face considerably higher tariffs ranging from 7% on wood products and machinery to 15-20% on footwear and transport equipment, and nearly 68% on food items. According to the White House, the US average applied Most Favored Nation (MFN) tariff on agricultural goods is 5%, compared to India’s 39%. India also imposes a 100% tariff on U.S. motorcycles, while the U.S. imposes only a 2.4% tariff on Indian motorcycles.
Impact on Agriculture sector
If the US extends reciprocal tariffs to a broader range of farm products, India’s agriculture and food exports—where tariff differentials are high but trade volumes are low—would be heavily impacted.
Impact on textile, leather and wood products
The Reuters report highlighted that the textiles, leather, and wood products face relatively lower risks due to smaller tariff differentials or limited US-India trade. Many American companies produce these goods in South Asia, benefiting from India’s free trade agreements, which allow them to sell at lower tariffs in the US domestic market.
Exploring the worst-case scenario
In the worst-case scenario, where the U.S. imposes a uniform 10% tariff hike on all Indian imports, India’s economy could face a hit of 50 to 60 basis points, according to Standard Chartered Bank economists, assuming an 11-12% drop in US imports.
What can India offer in an effort to ease tensions?
India has already reduced tariffs on several items, including cutting tariffs on high-end motorcycles from 50% to 30%, and on bourbon whiskey from 150% to 100%. India has also promised to review additional tariffs, increase energy imports, and purchase more defense equipment from the US.