U.S. tariffs of 25% on leather, textiles, and shrimp exports may significantly impact these sectors, caution industry analysts.
The United States has announced a 25% tariff on various domestic export sectors, including leather, footwear, textiles, shrimp, gems and jewellery, chemicals, electrical and mechanical machinery, and shrimp. This decision, effective from August 7, 9.30 am IST, is expected to significantly impact the bilateral trade between India and the US.
The tariff increase does not apply to goods cleared for consumption in the US by October 5, providing some relief to exporters. However, the duty on all Indian-origin goods could severely hit the country's exports to America, according to think tank GTRI.
The sectors most affected by the tariff include petroleum products, smartphones, pharmaceuticals, engineering goods, electronics, and textiles, largely due to their high import content and low domestic value addition. Quick estimates suggest that India's goods exports in FY 2026 may come down by 30% from $86.5 billion in FY 2025 to $60.6 billion in FY 2026.
The tariff is an additional reciprocal duty on top of the standard most favored nation (MFN) tariffs, significantly raising the overall cost of Indian imports to the US. Other countries like Bangladesh, Sri Lanka, Taiwan, and Vietnam face lower duties (around 20%), whereas India faces a harsher 25-30% tariff combined with additional penalties linked to India's defence and energy purchases from Russia.
Regarding the India-US bilateral trade agreement, this tariff move is broadly seen as a pressure tactic by the US ahead of the sixth round of trade talks scheduled shortly after the tariff imposition. India has stated that it is studying the implications while remaining committed to concluding a fair and mutually beneficial trade deal.
Exporters are concerned about the impact of the tariff increase and are hoping to sell below cost to keep their factories running and avoid mass layoffs. The first phase of the India-US bilateral trade agreement is aimed to be concluded by fall (October-November) this year.
The Federation of Indian Export Organizations (FIEO) has noted that the order provides relaxation for goods in transit and those loaded on ship for final sailing to the US by August 7. Indian shrimp exporters, who contribute close to 48% of their exports to the US market, are facing an unprecedented challenge in this market.
The Indian beer industry is facing a bottleneck due to the lack of can manufacturing facilities. Negotiations between India and the US are ongoing for an interim trade deal, but there will be no compromise on duty concessions for agriculture items, dairy, and genetically modified products.
Sudhir Sekhri, Chairman of the Apparel Export Promotion Council, has requested immediate government intervention to offset the impact of the tariff increase. The sectors that would bear the brunt of the 25% duty include textiles/clothing (USD 10.3 billion), gems and jewellery (USD 12 billion), shrimp ($2.24 billion), leather and footwear ($1.18 billion), chemicals (USD 2.34 billion), and electrical and mechanical machinery (about USD 9 billion).
Without exemptions, the 25% tariff combined with additional levies linked to geopolitical factors reduces India's competitiveness relative to other exporters who have secured trade deals with the US. The tariff heightens tensions and narrows the window to negotiate a better deal, especially since India's negotiators aim to secure discounted tariff levels similar to agreements struck by other countries.
In summary, the 25% tariff in FY 2026 is projected to slash India's goods exports to the US by about 30%, heavily impacting petroleum, pharmaceuticals, electronics, and related sectors. It complicates ongoing bilateral trade negotiations by adding economic and geopolitical pressures on India-US trade relations.
- The 25% tariff on various export sectors in the US could severely hit the country's exports to India, according to think tank GTRI.
- Exporters are concerned about the impact of the tariff increase and are hoping to sell below cost to keep their factories running and avoid mass layoffs.
- The Federation of Indian Export Organizations (FIEO) has noted that the order provides relaxation for goods in transit and those loaded on ship for final sailing to the US by August 7.
- Indian exporters in sectors such as textiles/clothing, gems and jewellery, shrimp, leather and footwear, chemicals, and electrical and mechanical machinery are expected to be significantly affected by the tariff.
- Sudhir Sekhri, Chairman of the Apparel Export Promotion Council, has requested immediate government intervention to offset the impact of the tariff increase.
- Regarding the India-US bilateral trade agreement, this tariff move is broadly seen as a pressure tactic by the US ahead of the sixth round of trade talks, potentially complicating negotiations and adding economic and geopolitical pressures on India-US trade relations.
