NEW DELHI: A first look at the announcements made by US President Donald Trump on reciprocal tariffs suggests that India could emerge as a relative gainer, as the burden of import duties is significantly higher on other emerging nations, such as China and Vietnam.
"With the US setting a relatively lower reciprocal tariff rate of 26% on Indian goods — compared to 54% (20% previously imposed + 34% announced on Wednesday) on China, 46% on Vietnam, 37% on Bangladesh, and 36% on Thailand — India gains a natural competitive advantage in several key sectors," says Ajay Srivastava, founder of the Global Trade Research Initiative.
Trump announced a baseline tariff of 10% on all imports (effective April 5), with specific reciprocal tariffs on multiple countries (effective April 9). Some sectors, including pharmaceuticals, semiconductors, copper, and energy products, will remain exempt.
The ‘punitive’ tariff would be imposed on foreign goods flooding the US in order to promote local manufacturing. Even if the US succeeds in doing so, it will take 3-4 years to create a full ecosystem and supply chain. Till then, Indian goods attracting lower tariff than other major exporters like China, Vietnam, Bangladesh, etc may benefit in the short-term, feel experts.
According to Madhavi Arora, chief economist at Emkay Global Financial Services, Asia has been more significantly impacted than India by the country-specific tariffs announced on Wednesday. Furthermore, India is less export-exposed to the US compared to other emerging markets in the region. However, she cautions that India is unlikely to remain insulated from the broader economic downturn affecting Asian emerging markets.
"China's response to the massive tariff blow will be critical for India, considering its excess industrial capacity and potential for dumping in global and Asian markets. While India negotiates with the US and other trade partners, we may also need protective measures against Chinese actions, which could immediately impact domestic industries and contribute to disinflationary pressures," she says.
Sanjay Nayar, president of Assocham, notes that India has been positioned in the middle of the tariff structure, with a 26% rate in addition to the 10% baseline duty, requiring further assessment to gauge its real impact.
"Net-net, India's export competitiveness in the US market appears to be less adversely affected on a relative basis. However, our industry must make concerted efforts to enhance export efficiency and value addition to mitigate the impact of these tariffs," he adds.
Sectoral Impacts
Analysts see no significant impact on large exporting sectors.
"For now, there is relief as no incremental adverse impact is expected on major exporting sectors such as IT services, pharmaceuticals, and automobiles," says Trideep Bhattacharya, President & Chief Investment Officer, Equities, at Edelweiss Asset Management Limited (EAML).
He also believes the announced tariffs could provide India with a relative competitive advantage over its Asian peers.
Textiles
According to analysts, the high tariffs on Chinese and Bangladeshi exports create opportunities for Indian textile manufacturers to gain market share, attract relocated production, and increase exports to the US.
"India's strong base in textile production, coupled with lower tariffs, could drive greater global demand and new investments in the sector," says Ajay Srivastava of GTRI.
Electronics and Telecom
Srivastava further states that in the electronics, telecom, and smartphone sectors, countries like Vietnam and Thailand are likely to lose cost competitiveness due to steep US tariffs.
This could create an opportunity for India, which has already begun investing in electronics manufacturing through government incentives such as the Production-Linked Incentive (PLI) scheme.
However, while semiconductors remain exempt from tariffs, India is unlikely to benefit significantly, as the sector will continue to be dominated by technologically advanced players such as Taiwan.
Autos & Metals
Autos, auto parts, and steel and aluminium products are already subject to Section 232 tariffs at 25%, as per President Trump’s order on 26 March 2025, and are not covered under the reciprocal tariff regime.
Recession Fears
The Indian equity markets reacted negatively to the announcement, with the Nifty closing at 23,250.10, down from its previous close of 26,332, amid rising fears of a US recession.
Madhavi Arora of Emkay Global Financial Services highlights the increasing probability of a US recession.
"Higher tariffs will lead to a combination of lower US corporate profit margins and higher consumer prices, which could rise by more than 1.5%. The US economy may transition from its recent 'goldilocks' phase to stagflation in the coming quarters, potentially leading to a disinflationary impulse due to permanently lower output," she explains, adding that this effect could unfold over the next year.
