Trump’s Reciprocal Tariffs Take Effect India

The United States has rolled out a new wave of reciprocal tariffs under former President Donald Trump’s trade strategy, targeting nations perceived to impose unfair trade practices.

Aimed at creating a more balanced global trade environment, these tariffs could significantly alter international supply chains. India, among the affected nations, may see limited overall economic impact but notable sectoral disruptions.

According to Motilal Oswal Financial Services, the Indian export sectors most exposed to these tariffs include electrical machinery, gems and jewellery, pharmaceuticals, and iron and steel. Combined, these account for just 1.1% of India's GDP, suggesting that while the macroeconomic consequences may be contained, industry-level effects could be significant.

In the electrical machinery segment, India primarily exports industrial components and energy equipment. Tariffs would raise costs for U.S. importers, making Indian products less competitive in a price-sensitive market. This may lead to a decline in orders and market share.

The gems and jewellery sector, known for its labor-intensive operations and export-driven model, could see job losses in key hubs like Surat and Mumbai. Additionally, foreign currency inflows from this traditionally strong sector may be impacted.

In pharmaceuticals, India’s generics and API exports to the U.S. could face headwinds. However, if healthcare-related exemptions are applied, some relief could follow. The iron and steel industry, already under global strain, may suffer further as U.S. duties divert trade flows elsewhere.

India is expected to pursue diplomatic discussions to mitigate these effects, possibly negotiating exemptions in strategic sectors like IT and healthcare. Retaliatory measures or new trade agreements may also be explored.

To adapt, Indian exporters should consider diversifying markets, realigning value chains, and engaging in policy advocacy through trade bodies. India’s strategic response will define its resilience in this evolving trade landscape.

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