How Will New US Tariffs Affect India's $86 Billion Export Market?

The recent imposition of a 25% tariff by the US is set to significantly impact India's export market, valued at over $86 billion. Key sectors such as textiles, gems, and shrimp are expected to bear the brunt of these tariffs. While half of India's exports may remain unaffected due to exemptions, the apparel sector is particularly vulnerable. Industry leaders are urging government intervention to mitigate the potential fallout, as exporters may face severe challenges in maintaining operations. This article delves into the implications of these tariffs and the broader context of US-India trade relations.

By Narendra Chaudhary Aug 1, 2025, 19:40 IST

Impact of US Tariffs on Indian Exports

New Delhi: The recent announcement of a 25% tariff by the United States is expected to significantly affect nearly half of India's exports, which are valued at over $86 billion, according to government sources.

The sectors likely to be most affected by this tariff include textiles and clothing ($10.3 billion), gems and jewelry ($12 billion), shrimp ($2.24 billion), leather and footwear ($1.18 billion), animal products ($2 billion), chemicals ($2.34 billion), and electrical and mechanical machinery (approximately $9 billion).

Sources indicate that around half of the goods exported from India to the US fall under exemption categories, such as pharmaceuticals and electronics, meaning the impact will primarily concern the remaining half.

"More than half of India's exports to the US will remain unaffected by the new duty. Due to the Section 232 exemption, only about $48 billion worth of exports will be subject to these tariffs," they explained, noting that the remaining exports will have minimal impact on a nation with a GDP of around $4 trillion and a consumer base of 1.4 billion.

In the fiscal year 2024-25, trade between India and the US reached $131.8 billion, comprising $86.5 billion in exports and $45.3 billion in imports.

As per the Global Trade Research Institute (GTRI), the 25% tariffs will not apply to exempt categories, which include finished pharmaceutical products, active pharmaceutical ingredients (APIs), energy products like crude oil and natural gas, critical minerals, and various electronics and semiconductors.

An exporter highlighted that the apparel sector, which exports $5.33 billion worth of goods to the US, will face the most significant challenges.

Sudhir Sekhri, Chairman of the Apparel Export Promotion Council (AEPC), stated, "We urge the government to take immediate action to mitigate this substantial setback. Exporters are in a precarious position and may have to sell at a loss to keep operations running and prevent mass layoffs."

Yadvendra Singh Sachan, Managing Director of Growmore International Ltd based in Kanpur, suggested that exporters should seize this moment to explore alternative markets.

"We must diversify our export strategies," Sachan emphasized.

Ajay Sahai, Director General of the Federation of Indian Export Organizations (FIEO), mentioned that the US order allows for relaxation for goods already in transit or loaded onto ships for delivery to the US by August 7.

US President Donald Trump has introduced extensive new tariffs affecting numerous countries, including a 25% duty on Indian goods, signaling a new phase of American protectionism that raises concerns about broader disruptions in global trade.

The executive order titled 'Further Modifying The Reciprocal Tariff Rates' outlines tariff rates for nearly 70 countries.

In the trade relationship with the US, India recorded a surplus of $41 billion in 2024-25, compared to $35.32 billion in 2023-24 and $27.7 billion in 2022-23.

In 2024, India's primary exports to the US included drug formulations and biologicals ($8.1 billion), telecom instruments ($6.5 billion), precious and semi-precious stones ($5.3 billion), petroleum products ($4.1 billion), vehicle and auto components ($2.8 billion), gold and other jewelry ($3.2 billion), ready-made cotton garments ($2.8 billion), and iron and steel products ($2.7 billion).

Imports from the US included crude oil ($4.5 billion), petroleum products ($3.6 billion), coal and coke ($3.4 billion), cut and polished diamonds ($2.6 billion), electric machinery ($1.4 billion), aircraft and spacecraft parts ($1.3 billion), and gold ($1.3 billion).

India's merchandise exports to the US surged by 22.8% to $25.51 billion in the April-June quarter of this financial year, while imports increased by 11.68% to $12.86 billion.