US tariff to hit Indian electronics sector; IT exports may feel ripple

Trump's 25% tariff may strain India's electronics manufacturing in the short term; experts urge value chain shift, export diversification, and AI in IT delivery

United States President Donald Trump’s decision to impose a 25 per cent tariff on India is likely to create short-term challenges for the electronics manufacturing sector in India, as well as have an indirect impact on the country's information technology and services exports, experts said.

 

The imposition of these tariffs also underscores the need for India to deepen its competitiveness in the global electronics manufacturing supply chain through lower input tariffs, stronger trade access, and accelerated infrastructure execution, the experts said.

 

“It also underlines the urgency for India’s electronics sector to diversify export markets, deepen domestic markets, develop Indian brands and products, and move up the value chain to reduce dependency on price-sensitive, tariff-exposed exports,” said Ashok Chandak, head, India Electronics and Semiconductor Association and SEMI India.

 

 

The imposition of tariffs from August 1 also offers a silver lining by giving the country a chance to “reduce exposure to risks and emerge as a dependable, cost-effective alternative in the global manufacturing landscape,” said Kunal Chaudhary, tax partner, EY India.

 

“The upcoming trade negotiations with the US offer a path to restore balance, and if handled strategically, can even enhance India’s appeal as a long-term investment destination,” Chaudhary said.

 

The Indian IT services export sector, though not directly impacted by the 25 per cent tariffs, may face a substantial ripple effect, said Nitin Bhatt, technology sector leader, EY.

 

“Rising input costs may prompt US companies to scale back discretionary tech spending. Simultaneously, growing unease around workforce mobility and evolving digital taxation frameworks could redefine how cross-border services are priced and delivered,” Bhatt said.

 

Companies in the IT sector will need to pivot to hybrid delivery models and embed artificial intelligence (AI) at scale to weather demand volatility and negotiate an increasingly fragmented and uncertain global landscape, he added.