India’s export rate to the United States reached a 26% tax rate, putting it in the toughest countries. But while key sectors in India, such as textiles, electronics and engineering products, are preparing for the impact, certain industries, including pharmaceuticals and certain agricultural exports, may be relatively unscathed.
GTRI founder Ajay Srivastava said Trump’s decision to raise tariffs on reciprocity rates on several Asian and European countries, including China, Vietnam, Taiwan, Thailand and Bangladesh, may give India a chance to strengthen its position in global trade and manufacturing.
Srivastava said India’s exports of steel, aluminum and automatic related goods will face a 25% tariff, while pharmaceuticals, semiconductors, copper and energy products will not be taxed.
Also Read: Trump’s 26% tariff puts pressure on India. Is New Delhi ready to influence?
Trump announces widespread tariffs, marginal markets
Trump announced Wednesday that the U.S. would impose a 10% universal tariff on all imports and a higher tax on specific countries. The new responsibilities target some of the largest trading partners of the United States, and China now faces tariffs on many commodities of more than 50%, while the EU, Japan, Vietnam and others have also been heavily charged.
The move deepened fear of revenge for affected countries, with economists warning of potential disruptions in global trade flows. As prices for businesses and consumers rise, investors are also upset about the impact of U.S. economic growth.
Also Read: India Faces “Discount” 26% Tariff
India hits tariffs of 26%, higher than Japan and South Korea
Despite Trump’s strong personal ties to Prime Minister Narendra Modi, India has not shaken off tariffs. The new 26% tax on Indian imports is the highest levy for any major trading partner in the United States.
India’s new tariff rate is slightly higher than the 20% levied by the EU, Japan’s 24% and South Korea’s 25%. However, it is still far below the steep speed imposed by China, which includes the newly announced 34% mutual tariffs, and the existing 20%. Vietnam is another major manufacturing hub, hitting 46% tariffs, while Thailand and Indonesia face 36% and 32% tariffs, respectively.
Although some developed countries (such as the United Kingdom (10%) and Switzerland (34%) have lower tariffs, they do not compete directly with India in key export categories. Among Asian economies, only Malaysia faces 24% tariffs, competing with India in some sectors.
Trump announced tariffs, describing Modi as a “good friend”, but defending the measure is a necessary response to India’s trade policy. “You are my friend, but you are not treating us,” he said. The U.S. president called the new tariff “discounted tariffs” and aimed at offsetting India’s high tariffs on American goods.
Please read also: Trump to Modi: “You are not right to us” because we reach India with 26% tariff
Trup tariffs: Some industries may benefit
Tariffs mark a major setback for India, which India is trying to avoid by providing concessions to the Trump administration’s important trade issues. Key export sectors, including textiles, engineering products, electronics, and gemstones and jewelry, are expected to bear the brunt.
But government officials and industry leaders are trying to understate concerns, which suggests that India is still better than some competitors. “It’s a mixed bag, not a setback for India,” a senior official told the Indian News Trust.
Pharmaceutical tax exemption
In a major relief to India’s pharmaceutical industry, U.S. President Donald Trump has exempted one of India’s major exports to the United States from new reciprocal tariff rules. The decision, announced on Thursday, prompted Indian manufacturers to impose additional taxes as part of a wide range of tariff measures Trump aims to offset trade imbalances.
The White House’s fact sheet details the exemption: “Certain commodities are not subject to reciprocal tariffs. These items include: (1) articles compliant with 50 USC 1702(b); (2) steel/aluminum/automatic parts and already subject to Section 232 tariffs; (3) copper, pharmaceuticals, with 432 overviews; tariffs (5) gold bars;
The U.S. market is crucial to India’s pharmaceutical industry, accounting for 30% of its overall exports. Industry leaders welcomed the exemption, saying it highlighted the important role of affordable generic drugs in public health, economic stability and national security.
Farm exports may remain strong despite Trump tariffs
Despite the newly announced tariffs on Indian goods at 26%, India’s agricultural exports to the United States will remain steady and even grow as competing countries face a steeper responsibility. Ashok Gulati, an agricultural economist cited by PTI, said India’s agricultural exports may be smaller than their regional competitors.
Trump’s 26% tariff on Indian goods could have limited impact on key agricultural exports such as seafood and rice, as tariffs on other countries in the region are significantly higher.
Regarding seafood exports, especially shrimp exports, Gulati said India’s relative tariff advantage, and shrimp’s share of overall U.S. food spending means demand is unlikely to decline in a large way. As a result, Indian seafood exporters may not see significant damage caused by trade with the United States and may even gain a competitive advantage over other exporters.
Please read also: Economists say India’s farm exports could bear U.S. tariffs as competitors face steeper responsibilities.
Trump tariffs: India’s electronics industry is in a better position
In the electronics export sector, India also appears to be in a better position than its neighbors China and Vietnam, as India imposes a lot less tariffs than its competitors.
India is in a good position in the first round of mutual tariff announcements, the Cellular Electronics Association of India (ICEA) said. India receives better tariff treatment than major electronics export competitors such as China, Vietnam, Thailand and Indonesia. ICEA attributes this result to “the extraordinary and ruthless efforts of our negotiators and leaders.”
Although some countries (such as Brazil and Egypt) receive slightly superior tariff treatment, India is positioned particularly strong compared to China and Vietnam. Now, China faces a total of up to 54%-79%, while Vietnam has a tariff rate of 46%. This provides India with a valuable window of competitiveness in the near future exports, ICEA said.
Please read also: Vietnam is better on electronics than China after Trump moves: Industry
India’s textile sector is ready to get in Trump tariff calories
Trump’s decision to impose a 26% reciprocal tariff on India could help boost the country’s clothing and textile industry as it makes India a more attractive sourcing destination for American buyers. Competing textile exporters such as Vietnam, Bangladesh, Cambodia, Pakistan and China have been hit by higher tariffs, which could be beneficial to India.
The United States remains the largest buyer of textiles in India. In 2023-24, India’s textile exports were approximately US$36 billion, of which the United States accounted for 28%, or US$10 billion. The U.S. share of textile exports in India has been steadily rising, from 21% in 2016-17 and 2017-18 to 25% in 2019-20, reaching 29% in 2022-23.
Please read also: India’s textile industry to thrive amid U.S. tariff changes
Trump tariffs omit Indian steel, but dumping concerns are looms
India’s domestic steel industry received relief when Trump waived steel and aluminum items from other reciprocity tariffs. Last month, the U.S. imposed 25% tariffs on steel and aluminum exports, but the latest move ensures that the metals do not face further imposition under the new tariff structure.
A fact sheet released by the White House on Wednesday outlined the exemption, stating that “certain commodities are not subject to reciprocity tariffs. These commodities include steel and aluminum items and cars, and auto parts are already subject to Section 232 tariffs.”
While duty-free avoids additional costs for exporting Indian steel and aluminum, industry representatives warn that the global trade environment remains challenging. They noted that as the access to the U.S. and EU markets becomes more restrictive for certain Asian-initiated countries, India has a risk of increased dumping.
Industry leaders urged the Indian government to take measures to prevent excess steel from flooding the domestic market, warning that Indian producers could face price pressure on low-cost imports without safeguards.
Also read: India’s steel industry breathes a sigh of relief as the United States exempts from additional export levy
At the same time, Trump also signed an execution order ending a minimum trade exception, after previously allowing goods worth $800 or less to enter the United States with tax exemption. The decision could have a significant impact on e-commerce giants such as China-based Shein and Temu, which relies on De Minimis rules to expand its presence in the U.S. market.
In another major trade move, Trump signed an executive order ending a “minimum” trade exception that allows its imports worth $800 or less to be listed for entry into the U.S. tax-free. The change is expected to affect Asian e-commerce giants, especially Chinese-based companies such as Shein and Temu, which rely on exemptions to sell directly to U.S. consumers at a lower cost.
With new tariffs, India now faces both challenges and opportunities in its trade relations with the United States. While several export sectors will feel the calories of the 26% tariff, drug exemptions and the relative advantages of electronics and textiles provide some relief.
As global trade tensions intensify, businesses and policy makers will pay close attention to how India navigates this ever-changing landscape.
