Unlocking India’s $434 Billion Merchandise Exports: The Impact of Trump’s 50% Tariff Increase

India is facing a tough challenge with a hike in tariffs on its exports to the U.S. Last week, President Trump imposed a 25% duty on Indian goods due to oil purchases from Russia. This is on top of existing tariffs, pushing the total possible tariff to a staggering 50%. Analysts warn that this could hurt India’s export competitiveness and slow down the economy.

Shilan Shah, an economist at Capital Economics, points out that U.S. spending makes up about 2% of India’s GDP. With these new tariffs, he suggests that growth forecasts may drop from 7% to around 6% for this year. The extra tariff could also hold back the economy by about 0.6 percentage points.

The U.S. is India’s largest export market, with about $86.51 billion worth of goods shipped to America last year, accounting for roughly 20% of India’s total exports. Key sectors affected will likely include engineering goods, textiles, gems, and electronics.

Engineering Goods

India’s engineering sector is crucial, contributing nearly $117 billion in exports. In the last fiscal year, India shipped about $19.16 billion worth of these goods to the U.S.—around 16% of total engineering exports. The steel sector is already facing a 50% tariff, which complicates the outlook for other engineering exports, too.

Textiles and Jewelry

The textiles industry is another major area of concern, employing about 45 million people in India. Around 34% of textile exports go to the U.S. This sector could take a hit, especially as they struggle to compete with countries like Bangladesh. The gems and jewelry sector, which employs around 5 million people, also exports a large percentage of its goods to the U.S. Higher tariffs could be a significant burden here, urging industry leaders to seek government support.

Electronics

India’s electronics exports rely heavily on the U.S., comprising 38% of total exports in the last fiscal year. Smartphone exports have surged lately, especially after Apple shifted some of its production to India. However, with tariffs again on the table, the future of this growth is uncertain.

Pharmaceuticals

While currently exempt from tariffs, the pharmaceutical sector faces the risk of impending duties. India’s pharma exports to the U.S. reached over $10.5 billion last year, accounting for nearly 35% of total shipments. Experts fear that potential tariffs could cripple this sector, which is already heavily reliant on the U.S. market.

Conclusion

Importantly, Michael Wan, a senior economist, emphasizes that while the U.S. can look for alternative sources, India has a harder time diversifying its exports. Countries like Vietnam and Mexico could easily become more attractive suppliers for electronics and textiles, respectively.

In this competitive climate, the future of India’s exports depends on navigating these tariffs effectively. The potential economic slowdown poses challenges not just for businesses, but for workers and families who depend on these sectors for their livelihoods.

For more detailed insights into trade impacts and tariff policies, you can read reports from trusted sources like CNBC.

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