Trump's auto tariffs to have minimal impact on India's auto sector: GTRI

The implications of the US announcement to impose 25 per cent import duty on completely built vehicles and auto parts from April 3 remain limited for India's auto industry and may even present an opportunity for domestic exporters, think tank GTRI said on Thursday.

On March 26, US President Donald Trump announced a sweeping 25 per cent tariff on completely built vehicles (CBUs) and auto parts, a move set to take effect on April 3. 

"An analysis of India's auto and auto component exports in calendar year 2024 suggests that the impact of these tariffs on Indian exporters will be minimal," Global Trade Research Initiative (GTRI) Founder Ajay Srivastava said.

In the case of passenger cars, the think tank said India exported a modest $ 8.9 million worth of vehicles to the US in 2024, which is just 0.13 per cent of the country's total exports of $ 6.98 billion.

He said this negligible exposure implies the tariffs will have no real effect on India's thriving car export business and in other categories too, US exposure is either low or manageable.

Truck exports to the US stood at just $ 12.5 million, representing 0.89 per cent of India's global truck exports and these figures confirm a limited vulnerability.

However, it said, some impact is likely in car chassis fitted with engines, where America accounted for $ 28.2 million of India's $ 246.9 million in global exports (11.4 per cent).

"The segment that warrants the most attention is auto parts. India exported $ 2.2 billion worth of auto parts to the US in 2024, comprising 29.1 per cent of its global auto part exports. While this initially appears concerning, a closer look reveals a level-playing field," he said.

The US imported $ 89 billion worth of auto parts globally last year, with Mexico accounting for $ 36 billion, China for $ 10.1 billion, and India for just $ 2.2 billion.

Since the 25 per cent tariffs apply across the board, all exporting countries face the same hurdle.

In this context, he said, India's auto component industry may even find an opening.

"With its competitive advantage in labour-intensive manufacturing and competitive India's import tariff structures (ranging from zero to 7.5 per cent), India could increase its market share in the US over time," he said adding rather than retaliating, the Indian government should view the tariff move as a neutral or even mildly advantageous event in the long term.

He added that India's sector remains largely insulated.

With minimal direct exposure in most categories and potential upside in auto parts, there is little reason for India to counteract, Srivastava said.

He suggested that any lowering of tariffs by India to avoid tariffs on passenger cars would be counterproductive.

Citing an example of Australia, he said, when Australia reduced its import tariffs from 45 per cent to 5 per cent in the late 1980s, it paved the way for the eventual collapse of its domestic auto manufacturing industry.

"With the Indian auto sector contributing nearly one-third of the country's manufacturing GDP, any similar misstep must be avoided. Preserving the stability of the Indian auto sector is vital," he noted.