As the reciprocal tax by the US government looks imminent, Indian exporters are in a wait-and-watch situation. They are worried but they cannot fully fathom the sectoral impact as yet. The full impact will be known only when the tariff is implemented. But the initial estimates suggest India’s farm sector, gems and jewellery, electronics, auto components, and textiles & apparels are the sector likely to get impacted most.
An analysis by Global Trade Research Initiative (GTRI), the Indian farm exports to the US currently face a 5.3% tariff, whereas US farm exports to India face a much higher 37.7%, creating a tariff differential of 32.4%. Pharmaceuticals face an additional tariff of 10.9%, diamonds & jewellery faces 13.3%, and electronics faces 7.2%.
“If the US implements a reciprocal tariff policy on India on April 2, India’s exports of gems and jewellery—particularly studded gold jewellery and cut and polished diamonds—will be largely impacted,” Kirit Bhansali , chairman, Gems and Jewellery Export Promotion Council (GJEPC). He says GJEPC is already in talks with the government to ensure that a mutually agreeable solution is reached to safeguard India’s gem and jewellery exports.
The biggest competitor for Gems and Jewellery exports for India is Israel, which can export to the US at zero tariff, says a government official who is working on a report to assess the impact of the US reciprocal tax on India.
The official says around 44% of India’s exports to the US (in value terms) would attract an additional tariff of up to 2% tariff, while only 7-8% exports would attract over 20% additional tariff.
In electronics, smartphones exports may get impacted adversely. “If the reciprocal tariffs are imposed by the US, exports of smartphones from India will attract a tariff of 15%. This could impede the growing trajectory of smartphone exports from India as currently the tariffs attracted stand at 0%” says a PwC report. In farm and processed food sector, the hardest-hit sector will be fish, meat, and processed seafood, with $2.58 billion in exports facing a 27.83% tariff differential, as per GTRI. Shrimp, a major export, will become significantly less competitive.