Tariffs: Trump’s Most Beautiful Word, Ugly Shock For India?

As U.S. President Donald Trump’s reciprocal tariffs loom just days away, set to take effect on April 2, India braces for a potential jolt to its $87.4 bn export market in the United States. The policy, designed to mirror tariffs imposed on American goods, could reshape a trade relationship that has nearly doubled in a decade, testing India’s economic resilience amid global uncertainty.

A team of trade negotiators are in New Delhi for a four-day visit just ahead of Trump’s tariff deadline to hammer out a deal with the Modi government. The visit is under the BTA or Bilateral Trade Agreement between the two countries.

Trump, in his March 4 address to Congress, singled out India’s “very unfair” duties—averaging 12% compared to the U.S.’s 2.2%—and vowed to level the playing field. With bilateral goods trade hitting $129.2 bn in 2024, India’s surplus of $45.6 bn has long irked Washington. Now, key exports like pharmaceuticals ($10.4 bn), diamonds ($7.61 bn), and broadcasting equipment ($6.18 bn) face the risk of higher duties, threatening a 3-3.5% drop in shipments, according to SBI Research.

India’s response has been swift but cautious. Ahead of the deadline, New Delhi slashed tariffs on $23 bn of U.S. goods, from motorcycles to electronics, aiming to appease Trump and boost American exports like crude petroleum ($5.5 bn) and coal briquettes ($4.61 bn). Yet, analysts doubt this will fully deflect the tariffs, given India’s historically protectionist stance—auto tariffs exceed 100%—and Trump’s focus on erasing trade deficits.

The stakes are high. The U.S. absorbs 17.7% of India’s exports, and a $7 bn annual hit, as estimated by Citi Research, could dent GDP growth by 5-10 basis points, according to ratings and research agency Ind-Ra. Sectors like jewellery and chemicals, already reeling from a slowing domestic economy, could see margins shrink as U.S. prices rise. Meanwhile, India’s IT services—over 70% U.S.-reliant—face indirect risks if trade tensions spill into visa policies.

Here are some key sectors that will be affected by the new Trump tariff regime.

Pharmaceuticals

India’s pharmaceutical sector, the largest single export to the U.S. at $10.4 bn in 2023, faces significant exposure. Generic drugs, a cornerstone of India’s $8 bn-plus pharma trade with America, could lose their cost edge if tariffs rise to match India’s 10% duties on U.S. pharmaceutical imports. “A 6-10% tariff hike could erode our competitiveness,” said Rakesh Patel, an analyst at Mumbai-based Pharma Insights. Citi Research estimates annual losses could reach $1-2 bn, with ripple effects on jobs in Hyderabad and Gujarat, where production hubs thrive.

Gems and Jewellery

The gems and jewellery sector, exporting $7.61 bn to the U.S. in 2023—chiefly diamonds—ranks among the most vulnerable. India’s 5-7% tariffs on U.S. precious stones contrast with America’s near-zero duties, suggesting a potential 5% reciprocal hit. “Margins are already thin; this could push smaller exporters out,” warned Ankit Shah of the Gem Jewellery Export Promotion Council. SBI Research projects a 3-3.5% export drop, translating to losses of $200-300 million annually, particularly in Surat’s cutting and polishing units.

Chemicals and Petrochemicals

Chemical exports, including petrochemicals worth $4 bn in 2024, face a double threat: direct tariffs and redirected global supply. India’s 7-15% tariffs on U.S. chemicals could trigger matching duties, raising costs for products like organic compounds and plastics ($2-3 bn combined). “Surplus from China, diverted by U.S. tariffs elsewhere, could flood India, depressing prices,” noted Anubhav Kathuria of Synergy Steels. Losses could hit $500 million, per India Ratings, squeezing smaller firms in Maharashtra and Tamil Nadu.

Automobiles and Parts

Auto ancillaries and components, part of India’s $1.5-2 bn automotive exports to the U.S., are also at risk. India’s 100% tariffs on U.S. vehicles dwarf America’s 2.5% duties, making reciprocal hikes likely. “A 10-15% tariff could disrupt supply chains for U.S. automakers reliant on Indian parts,” said auto analyst Vikram Desai. While trade volumes are smaller, the high tariff gap suggests losses of $100-200 million, hitting manufacturers in Pune and Chennai.

Textiles and Apparel

Textiles and garments, ranging $9-10 bn annually, face moderate but notable risk. India’s 10-20% tariffs on U.S. apparel contrast with America’s 3-5% duties, potentially inviting a 5-10% hike. “Demand could soften in a price-sensitive market,” said textile exporter Priya Menon. Losses may range from $300-500 million, per Morgan Stanley, though labour-intensive units in Tiruppur and Ludhiana could adapt via diversification.

Global ripples complicate the picture. Retaliatory tariffs from Canada and China could flood markets with cheap goods, pressuring Indian exporters elsewhere. A stronger U.S. dollar—up 10% since September—has already weakened the rupee to 87.16, raising import costs for India’s $41.8 bn in U.S. purchases. Stock markets reflect the unease: the Nifty index has shed 14% in 2025, with $15 bn in foreign outflows.

India’s countermeasures include diversifying trade—FTAs with the UK and EU are nearing completion—and boosting domestic production via the “Make in India” initiative. A bilateral trade agreement with the U.S., targeting $500 bn by 2030, remains in negotiation, but Trump’s April deadline leaves little room for delay.

For now, India walks a tightrope. Strategic concessions and regional alliances may cushion the tariff shock, but as Trump’s “America First” policy takes hold, the world’s fifth-largest economy must steel itself for turbulence.

India’s Exports to the US (2023)

Packaged Medicaments (Pharmaceuticals) - $10.4 bn

Diamonds (Gems and Jewellery) - $7.61 bn

Broadcasting Equipment (Electronics) - $6.18 bn

Textiles and Apparel - ~$5-6 bn

Petroleum Products - $4.64 bn

Organic Chemicals - $3.81 bn

Jewellery (Excluding Diamonds) - ~$2-3 bn

Crustaceans (Seafood) - $2.32 bn

Motor Vehicle Parts (Automotive) - $1.65 bn

Machinery (Miscellaneous) - $1.5-2 bn

Iron and Steel Products - $1.22 bn

Electrical Machinery - $1-1.5 bn

Spices - $0.95 bn

Rice - $0.85 bn

Furniture and Bedding - $0.7-1 bn

U.S. Exports to India (2024)

Mineral Fuels, Oils, and Products - ~$13-14 bn  

Crude Petroleum: $5.5 bn (2023) → ~$5.7 bn (2024, est.)

Coal Briquettes: $4.61 bn (2023) → ~$4.8 bn (2024, est.)

Liquefied Natural Gas (LNG) and Other Petroleum Products: ~$2.5-3 bn (2023, est.) → ~$2.6-3.1 bn (2024, est.)

Notes: This category dominates due to India’s rising energy demand. The 2024 growth reflects increased U.S. energy exports under strategic partnerships.

Machinery (Including Aerospace and Gas Turbines) - ~$7-8 bn  

Gas Turbines: $2.39 bn (2023) → ~$2.5 bn (2024, est.)

Aircraft and Parts: ~$2-3 bn (2023, est.) → ~$2.1-3.1 bn (2024, est.)

Notes: Includes Boeing aircraft and components, critical for India’s aviation sector. Exact splits vary, but this category grew modestly in 2024.

Precious Stones, Pearls, and Metals - ~$5-6 bn  

Diamonds (Unworked/Worked): ~$4-5 bn (2023, est.) → ~$4.1-5.1 bn (2024, est.)

Chemicals (Including Pharmaceuticals) - ~$4-5 bn  

Organic Chemicals: ~$2-3 bn (2023, est.) → ~$2.1-3.1 bn (2024, est.)

Pharmaceutical Products: ~$1-1.5 bn (2023, est.) → ~$1-1.6 bn (2024, est.)

Electrical Machinery and Equipment - ~$3-4 bn  

Plastics and Articles Thereof - ~$2-2.5 bn  

Optical, Medical, and Scientific Instruments - ~$1.5-2 bn  

Agricultural Products - ~$1-1.5 bn  

Nuts (e.g., Almonds): ~$0.5-1 bn (2023, est.) → ~$0.5-1.1 bn (2024, est.)

Iron and Steel - ~$0.5-1 bn  

Defense and Security Equipment - ~$0.5-1 bn  

Travel: $12.2 bn