In a surprising move that could reshape the dynamics of global trade, US President Donald Trump has announced a sweeping 27% reciprocal tariff on all goods imported from India.
This tariff hike, framed as a retaliatory measure to address trade imbalances, is expected to send ripples across various Indian industries — some more severely than others. The sectors bearing the brunt of the new tariffs include electronics and gems & jewellery, two of India’s most lucrative export verticals to the US.
With the electronics sector accounting for nearly $14 billion and gems & jewellery around $9 billion in annual exports, the tariff increase from a modest 0.4%–2% to a staggering 27% could significantly erode price competitiveness and profit margins. Smaller players and MSMEs in these sectors may be particularly vulnerable, facing shrinking demand and potential order cancellations.
The textile industry, while also subject to the new tariff, may find itself in a relatively advantageous position. Competing nations such as Vietnam and Bangladesh face even steeper tariffs — 46% and 37% respectively — potentially giving Indian manufacturers a price edge in the US market. Notably, certain sectors have been granted exemptions. Pharmaceuticals and energy-related exports, together worth an estimated $9 billion annually, are currently shielded from the tariff surge.
These exemptions reflect the strategic importance of these industries to both countries — the US depends heavily on India for generic medicines, while Indian energy exporters contribute to supply diversification for American markets. Other products exempt from the tariff include copper, semiconductors, lumber, and precious metals such as gold and silver, providing temporary relief to niche but high-value segments.
Though the tariffs pose short-term challenges, they may also open up long-term strategic opportunities. With competing Asian economies facing even harsher tariff regimes — China at 34%, Thailand at 36%, and Vietnam at 46% — Indian exporters could capture market share in select product categories, especially textiles and processed goods.
Furthermore, the shock could spur accelerated negotiations between Washington and New Delhi toward a bilateral trade agreement, potentially offering more predictable and favorable trade terms in the future.
Trump’s tariff strategy is a double-edged sword for India. While key sectors suffer immediate setbacks, others may gain a competitive advantage amid global shifts. The coming months will be critical as policymakers, exporters, and trade bodies recalibrate strategies to navigate this altered trade landscape.
