The US government’s decision on tariff on Indian imports is expected to have a major impact across multiple sectors. The new levies are likely to hit India’s $32 billion gems & jewellery exports hard, given the US accounts for $11.58 billion, or 34%, of these exports.
“While the tariff’s application to competing nations presents both challenges and opportunities, it is expected to significantly impact India’s diamond and jewellery sector, a cornerstone of its exports to the US,” the Gem & Jewellery Export Promotion Council said in a statement. “In the short run, we see challenges in sustaining India’s export volume of $10 billion to the US market.” The US is India’s largest goods export destination, about $78 billion in annual exports, or 18% of India’s total exports (FY24).
India has an annual goods trade surplus of about $35 billion with the US. Auto parts and aluminium exports remain outside the scope of the latest 27% levy, though they will still be subject to the previously announced 25% tariff. This is expected to affect Tata Motors’ JLR (exported from the UK), which derives 33% of its sales from North America.
“The tariff could force price hikes or cost-cutting measures to maintain margins. Given its premium positioning, JLR may have some resilience, but near-term volume pressure is expected,” said Sanket Kelaskar, analyst - institutional equity at Ashika Group. Since passenger vehicle exports from India to the US constitute less than 1% of total PV exports, tariff will not impact domestic automotive OEMs.
The auto component industry will face challenges. India’s auto components exports is 29% of industry revenues in FY24, with 27% of these exports going to the US.
Krishnamurthy, sr VP & co-group head of corporate ratings at ICRA, said while the situation is evolving, the recent tariff-related developments, coupled with inflationary pressures and a slowdown in US demand, could negatively impact revenue and earnings for component exporters over next few months. Experts say the new tariffs could provide India’s textile industry with a competitive edge over rivals like Vietnam, Bangladesh, and China, which face higher tariffs. “Currently, India holds 9% share in US textile and readymade garment imports, compared to China’s 25% and Vietnam’s 14%,” said Care Rating.