U.S. Tariffs on Indian Exports: Sectors at Risk and India’s Response

Why in the News?

1. The U.S. imposed 50% tariffs on a wide range of imports from India effective August 2025, sharply raising effective duty burdens in many product lines.
2. Several labour-intensive Indian export sectors—notably shrimp, textiles/apparel, gems & jewellery, carpets—are already reporting falling orders and prices, prompting New Delhi to prepare short-term relief

Key Highlights

1. How to gauge impact (three-part lens)
   1. Export value to the U.S. (absolute): Bigger exposure → bigger pain.
   2. S. share in a sector’s total exports: Higher share → higher dependence risk.
   3. Final tariff now faced: Jump from earlier rates to ~50%+ magnifies demand shock.
2. Sectors facing severe impact
   2. Shrimp: $2.4 bn exports to U.S. (32.4% share). Duty from 10% CVD → 60% total; Andhra Pradesh farm-gate/exporter purchase prices already down ~20% after interim hikes; further pressure expected.
   3. Textiles & apparel: $10.8 bn to U.S. (apparel $5.4 bn; U.S. = 35% of India’s apparel exports). Duty 9% → 63.9%; exporters rushing shipments, cancelling new styles; expansions frozen; shift cuts under consideration.
   4. Diamonds, gold & jewellery: $10 bn to U.S. (40% share). Duty 1% → 52.1%; Surat polishing units cutting production (industry employs ~12 lakh).
   5. Carpets: $1.2 bn to U.S. (6% share). Duty 2.9% → 52.9%.
   6. Also hit: Handicrafts, leather & footwear, furniture & bedding; agri (basmati, spices, tea, pulses, sesame).
3. Sectors with relatively modest but real impact
   2. Organic chemicals: $2.7 bn to U.S. (2% share). Duty 4% → 54%; industry seeking support (CHEMEXCIL).
   3. Metals (steel, aluminium, copper): $4.7 bn to U.S. (~17% share). Not the largest market, but critical for SMEs in Delhi-NCR and eastern foundry hubs; job disruption risk in stainless steel, castings, copper semis.
   4. Machinery & mechanical appliances: $6.7 bn to U.S. (20% share); likely demand softness.
4. Early on-ground signals
   1. Price cuts at origin (shrimp); order deferments/cancellations (apparel, jewellery); working-capital stress (yarn/fabric clusters); downsizing/shift curtailment (Bengaluru apparel units); capacity freeze (Noida-Gurugram).
5. Government stance & immediate plans
   1. Emphasis on “vocal for local”/swadeshi to reduce export dependence.
   2. Short-term, multi-ministry relief under preparation to ease exporter pain (working-capital/liquidity, compliance facilitation, etc.).
   3. Medium-term: Market diversification, fuller use of FTAs, and RBI support signalled by the Governor.

Implications

1. Trade & macro
   1. Near-term export slowdown in high-exposure lines; potential drag on merchandise export growth and trade balance.
   2. Regional cluster stress (Surat, Tiruppur, Ludhiana, Noida-Gurugram, Bengaluru, AP aquaculture belt).
2. Employment & incomes
   1. Labour-intensive sectors face shift cuts/layoffs, squeezing household incomes and MSME cash flows.
3. Supply chains & prices
   1. Buyers may re-source to competing origins; Indian suppliers may discount to stay in U.S. market, compressing margins.
4. Sectoral restructuring
   1. Push toward market diversification (EU, GCC, East Asia, Africa); product upgrading and higher value-add to absorb tariff shock.
5. Policy & diplomacy
   1. Scope for trade dialogue/limited carve-outs; at home, alignment of export credit, duty remission, and cluster support becomes pivotal.

Challenges and Way Forward

Conclusion

The sudden 50% U.S. tariff wall transforms the near-term landscape for several high-employment Indian export sectors. The heaviest pain is visible in shrimp, apparel, jewellery and carpets, with chemicals, metals, and machinery facing moderate but meaningful headwinds. A calibrated response—short-term liquidity and cost relief, swift market diversification, quality/logistics upgrades, and focused diplomacy—can cushion the shock while nudging a structural shift toward higher value-addition and broader market footprints.