Trade war or fair play? How Indian exporters are reacting to Trump tariffs

Indian exporters are evaluating the potential impact of the 27 per cent tariff imposed by US President Donald Trump on all imports from India. While the revised duty structure presents challenges, industry leaders believe India holds a competitive edge over other nations facing steeper tariff increases.

 

Trump Tariffs Impact on Indian exporters

 

The Federation of Indian Export Organisations (FIEO), the apex body representing Indian exporters, acknowledged that the new tariffs would impact Indian businesses. However, if they emphasised that India is still better positioned compared to other nations facing even higher tariffs.

 

Ajay Sahai, director general and CEO of FIEO said, “We have to assess the impact, but looking at the reciprocal tariffs imposed on other countries, we are in a lower band. We are much better placed compared to our key competitors such as Vietnam, China, Indonesia, Myanmar, etc.”

 

 

Sahai expressed hope that the ongoing negotiations for a bilateral trade agreement (BTA) between India and the US would conclude soon, potentially alleviating the impact of these tariffs. “We hope the BTA is concluded soon, as it would provide relief from these reciprocal tariffs,” he said.

 

However, the imposition of these tariffs could greatly impact the Indian economy. Nigel Green, CEO of global financial advisory deVere Group, told Reuters that the US duties risked pushing India closer to alternative trade blocs and strategic partners.   ALSO READ | Trump's 27% tariff on Indian exports: Who gains and who takes the hit?

 

“(This) makes Indian exports immediately less competitive. It dents investor confidence just as India is trying to attract global capital fleeing China,” he said.   

Experts bleived that Indian equities could also face the pressure. “The US decision to impose reciprocal tariffs on India, Japan, and others may trigger short-term volatility in global markets, particularly in sectors like autos, steel, and agriculture. Indian equities could face pressure due to potential retaliatory measures, impacting export-driven sectors (e.g., pharmaceuticals, IT). The immediate tariff enforcement (excluding autos, effective April 3) suggests urgency, possibly disrupting supply chains,” Pranay Aggarwal, Director & CEO, Stoxkart told Business Standard.

   

Agricultural exports: A silver lining?

 

Despite the tariff increase, agricultural economist Ashok Gulati believes India’s farm exports—especially seafood and rice—might remain resilient. He noted that Indian agricultural exports could even gain an advantage since other countries face steeper tariff hikes.

 

“We should not look at the tariff increase in absolute terms but compare it with the tariff increases on our competitors,” said Gulati. 

 

India faces a 27 per cent tariff, while China is subject to 34 per cent, Vietnam faces 46 per cent, Bangladesh 37 per cent, Thailand 36 per cent, and Indonesia 32 per cent. “This differential advantage could help Indian exporters sustain or even expand their market share,” he explained.

 

For seafood exports, Gulati believes demand in the US is unlikely to decline significantly due to its relatively small share in overall American food expenditure. Similarly, for rice exports, where current US tariffs range between 9 and 11 per cent, India retains a competitive edge against Vietnam and Thailand despite the increase to 27 per cent.

 

Trump’s announcement and justification

 

President Trump announced the tariffs on Thursday (IST), calling them “kind reciprocal”. He argued that India had been imposing “very, very tough” tariffs on American goods for years, creating an unfair trade imbalance.

 

“He (PM Modi) is a great friend of mine. But I said, ‘You’re a friend of mine, but you’re not treating us right,’” Trump said during his speech at the White House event ‘Make America Wealthy Again’. He further said, “They charge us 52 per cent, but we charged them almost nothing for years and decades.”  ALSO READ | US hits India with 27% tariffs, citing 'uniquely burdensome' trade barriers

 

To support his claim, Trump held up a chart listing tariff rates across different countries, showing that India imposes 56 per cent tariffs, including currency manipulation and trade barriers. In response, the US will now charge India a discounted reciprocal tariff of 27 per cent.

 

Which sectors will be most affected?

 

With the US accounting for about 18 per cent of India’s total goods exports, the 27 per cent tariff will significantly impact key sectors:

 

Electronics & telecom: India exports telecom instruments worth $6.5 billion to the US. Increased tariffs may slow down growth in this sector.

Gems & jewellery: Precious and semi-precious stones ($5.3 billion) and gold jewellery ($3.2 billion) are key Indian exports. Tariff hikes could reduce demand in the luxury market.

Steel & petroleum products: India exports petroleum products worth $4.1 billion and iron & steel products worth $2.7 billion. These industries may see shrinking profit margins due to the tariff rise.  ALSO READ | Trump reciprocal tariff: Which Indian sectors will be impacted? 

“For India, heightened trade tensions may weaken the INR and deter FDI, though domestic stimulus could offset risks. Japan’s auto exports may face headwinds, affecting Nikkei. Globally, risk-off sentiment could strengthen the USD and Treasuries. Investors should monitor retaliatory actions and sector-specific exposures. Defensive stocks (FMCG, utilities) may outperform, while cyclical sectors (autos, metals) could underperform. Long-term implications hinge on negotiation outcomes, but near-term caution is advised,” Aggarwal added. 

 

US-India trade relations and future outlook

 

The US remains India’s largest trading partner, with a significant share in both imports and exports:

 

India had a trade surplus of $35.32 billion with the US in 2023-24, up from $27.7 billion in 2022-23.

The US accounts for 6.22 per cent of India’s total imports and 10.73 per cent of bilateral trade.

Key imports from the US include crude oil ($4.5 billion), petroleum products ($3.6 billion), coal ($3.4 billion), and cut and polished diamonds ($2.6 billion).

 

With trade negotiations ongoing, Indian exporters remain hopeful that diplomatic talks will lead to reduced trade barriers and a more favourable business environment in the future. The conclusion of a bilateral trade agreement (BTA) could play a crucial role in resolving tariff disputes and strengthening economic ties between the two nations. 

“The announcement of a reciprocal tariff of 27 per cent by the US on India will make Indian exports less competitive in the market. It will be a significant setback for our top sectors, with the automotive and pharmaceutical sectors being the most affected. The market will become more diversified. The increase in tariffs may slow down Indian exports, especially if US firms localize their supply chains. In addition, increased trade barriers have the potential to disrupt supply chains, drive input costs higher, and affect profitability, while investor sentiment in the auto industry turns defensive, leading to market volatility. The imposition of reciprocal tariffs may slow down the logistics sector by higher shipping costs and reducing profit margins. As a result, Indian logistics companies may need to take different routes while navigating the complexities of global trade relations,” Jitendra Srivastava, CEO, Triton Logistics & Maritime told Business Standard.