US Tariff on India Sector Wise: Who's Hit the Hardest?

The recent imposition of a 26% reciprocal tariff by the United States on Indian imports marks a significant development in global trade dynamics. Announced under the trade policy framework of the Trump administration, this tariff is expected to reshape the economic relationship between the two countries. While certain critical sectors such as pharmaceuticals, semiconductors, and select energy products have been exempted, the overall impact on Indian exports is considerable.

In this article, we break down the sector-wise effects of this new tariff and offer insights into the historical tariff patterns that preceded this decision.

Overview of the New Tariff Policy

The United States has introduced a flat 26% tariff on a broad range of Indian imports. This move, aimed at balancing trade relations and promoting domestic manufacturing, could lead to a decline of approximately $5.76 billion in Indian merchandise exports to the US in 2025.

Although exemptions have been made for some key categories, the majority of Indian export sectors are expected to face significant cost pressures and competitive disadvantages in the American market.

Sector-Wise Impact of the 26% US Tariff on India

Electronics

• Impact: Electronics exports are among the hardest hit, with a projected decline of 12%.

• Previous Tariff: The average duty was only 0.41% before the increase.

• Export Value: The US imports approximately $14 billion worth of electronics from India annually.

Gems and Jewelry

• Impact: The sector could see a 15.3% drop in exports.

• Previous Tariff: Duties averaged around 2.12%.

• Export Value: The US is India’s largest market for jewelry exports, valued at over $9 billion annually.

Pharmaceuticals

• Impact: This sector is currently exempt from the new tariffs.

• Export Value: Accounted for $9 billion in 2024.

• Significance: India supplies 47% of generic prescriptions in the US, making it a key player in American healthcare.

Automobiles and Auto Components

• Impact: Severely affected, especially for components now facing the full 26% tariff.

• Previous Tariff: Components already faced up to 25%, with complete automobiles taxed similarly.

• Export Value: Auto component exports to the US are valued at over $2 billion.

• Key Players Affected: Bharat Forge, Sona BLW, and others reliant on the US market.

Textiles

• Impact: A short-term decline in exports is expected, with losses projected up to 12%.

• Export Value: Textiles accounted for $9.6 billion in FY2024-25.

• Outlook: India may gain long-term competitiveness due to relatively lower tariffs compared to countries like China and Vietnam.

Agriculture and Marine Products

• Impact:

  • Fish and crustaceans may see a 20.2% decline.

  • Processed food exports may face tariffs nearing 25%.

• Significance: These sectors are vulnerable due to high dependence on US markets.

Semiconductors and PV Cells

• Impact: Currently exempt, but future policy changes could affect the sector.

• Outlook: These are strategic areas where India has growth potential, but the situation remains fluid.

Historical Tariff Patterns: Old US Tariffs on Indian Goods

To appreciate the shift, it’s important to understand the tariff structure before this recent hike.

Previous US Tariffs on Indian Goods

• Tariff rates previously ranged from 6% to 33% across different categories.

• Auto components already faced a 25% tariff before April 2025.

• Between 2018 and 2022, average tariffs on Indian goods ranged from 2.72% to 3.91%.

These figures show that while certain sectors had moderate protection, the new across-the-board 26% rate is a sharp departure from earlier policies.

Indian Tariffs on US Goods

• India’s average Most Favored Nation (MFN) applied tariff stood at 17%, among the highest globally.

• Agricultural products faced tariffs as high as 39%.

• Non-agricultural goods were taxed at an average of 13.5%.

These high tariffs have historically been a point of friction in India-US trade discussions and are part of the rationale behind the US’s latest policy stance.

Products Exempted from the New Tariff

Certain critical goods have been spared from the new 26% tariff:

• Copper

• Pharmaceuticals

• Semiconductors

• Precious metals like gold and silver

• Select energy products and minerals not available domestically in the US

These exemptions suggest a strategic approach, allowing the US to maintain access to essential imports while targeting sectors with perceived trade imbalances.

Economic Implications and Strategic Outlook

The broader implications of this tariff increase include:

• Declining export competitiveness for key sectors such as electronics, gems and jewelry, auto components, and agri-marine products.

• Stable or favorable outlook for pharmaceuticals and textiles due to exemptions or strategic advantages.

• A push for Indian exporters to diversify target markets beyond the US.

• Potential policy shifts by the Indian government, including reducing tariffs on US goods, to de-escalate trade tensions.

Unlike in 2019, when India retaliated strongly after the US withdrew Generalized System of Preferences (GSP) benefits, this time India appears to be taking a more calibrated and conciliatory approach.

Conclusion

The 26% US tariff on Indian imports is a significant development with wide-ranging effects across multiple industries. While some sectors will suffer immediate setbacks, others may find opportunities in shifting trade dynamics. By understanding both the current policy and historical context, stakeholders can better navigate the challenges and opportunities that lie ahead.

As global trade policies continue to evolve, staying informed will be key for businesses, policymakers, and investors looking to adapt to a rapidly changing international trade environment.