Trump's 10% tariff reset may lift India's labor-intensive exports

The reduction of the US reciprocal tariff on India from 25 per cent to 10 per cent will significantly improve competitiveness of domestic labour-intensive sectors in the US such as pharma, electronics, engineering, textiles, and gems and jewellery.

In a major setback to US President Donald Trump's pivotal economic agenda for his second term, the US Supreme Court, in a 6-3 verdict written by Chief Justice John Roberts, ruled that the tariffs imposed by the president on nations around the world were illegal and that he had exceeded his authority when he imposed the sweeping levies.

Later, through a proclamation, the US announced a temporary import surcharge of 10 per cent ad valorem on articles imported into the US for 150 days from February 24.

 

These sectors at present were facing a reciprocal tariff of 25 per cent in the US market.

The US is a major export destination for these sectors and reduction of tariff will help boost exports, Federation of Indian Export Organisations (FIEO) Director General Ajay Sahai said.

A leather exporter said the development will make their goods more competitive.

However, Sahai said Section 232 tariffs on steel, aluminum, and certain auto products remain a constraint.

"India should leverage this improved position to expand market share while pursuing trade negotiations for greater stability and sectoral relief," he added.

If India should re-evaluate its trade deal with the US, he said the pact is comprehensive going much beyond only the tariff concessions on goods.

"A trade agreement would help tariff concessions or exclusions, provide long-term predictability and prevent re-imposition through alternate US legal routes... However, both sides may recalibrate negotiations in light of the changed tariff environment," Sahai said.

The tariff ruling, he said, creates an opportunity to pursue a more balanced and rules-based framework rather than one driven by unilateral tariff actions.

During 2021-25, the US was India's largest trading partner in goods. The US accounts for about 18 per cent of India's total exports, 6.22 per cent in imports and 10.73 per cent in bilateral trade.

In 2024-25, India-US bilateral trade touched USD 186 billion (USD 86.5 billion exports and USD 45.3 billion imports).