US exports to India could potentially decrease by 30% in FY26, forecasts GTRI, due to Trump's tariffs.
The implementation of 25% reciprocal tariffs by the US on Indian exports is expected to have significant negative impacts, particularly on labor-intensive sectors such as garments, textiles, shrimp, jewellery, and engineering goods.
Potential Impacts:
Indian exporters will face a higher tariff burden compared to competitors from countries like Ecuador, Indonesia, and Vietnam, leading to potential loss of market share in the US. For example, the seafood sector, mainly shrimp exports worth about Rs 60,000 crore annually to the US, could face losses up to Rs 24,000 crore due to the 50% tariff hike. Higher tariffs encourage US importers to source from other countries with more favorable duty rates, risking a shift away from Indian suppliers, especially in garments and textiles.
Labor-intensive sectors, such as garments and textiles, will be hit hardest due to their exposure to the US market and the labor-intensive nature, making costs sensitive to tariff changes. The mechanical gold jewellery exports to the US are likely to be hit the hardest.
Suggested Action Plans:
India may consider offering tariff concessions on select US farm products to seek reciprocal access improvements for garments and yarns, thus enabling a trade-off to lower US tariffs on labor-intensive exports. Removing the 11% duty on raw cotton imports could help reduce input costs and improve competitiveness in negotiations.
Diversification of export markets beyond the US is essential to mitigate dependency risk from tariff volatility. Enhancement of value-added exports, such as moving up the value chain in sectors like engineering goods and jewellery, might help offset tariff impacts by offering products less sensitive to tariff rates.
Aggressive trade diplomacy is critical to seek tariff relief and safeguard India’s export interests amid these reciprocal tariffs. The Indian government is examining the impact of tariffs and will take necessary steps to safeguard the national interest.
The Global Trade Research Initiative (GTRI) projects a 30% decline in Indian exports to the US, from USD 86.5 billion in 2024-25 to about USD 60.6 billion in 2025-26, due to the new 25% reciprocal tariffs. India's USD 4.7 billion in metal exports (mainly steel, aluminium, and copper) will also suffer due to the higher cost expected to curb demand from US infrastructure and energy buyers.
The US exports USD 2.5 billion worth of diamonds from India, but imports only USD 4.9 billion, with buyers often returning the rest. A high upfront tariff on diamonds could reduce demand due to increased costs on unsold stones.
President Trump has reiterated his stance on tariff reciprocity, emphasizing that the US will match tariffs imposed by other countries, including India, to "ensure fair trade". India and the US initiated talks for a Bilateral Trade Agreement (BTA) in March, aiming to complete the first stage by October-November 2025.
However, knitted and woven garments now face steep US tariffs of 38.9% and 35.3% respectively, much higher than the rates for Vietnam, Bangladesh, and Cambodia. India's USD 2 billion shrimp exports, which make up 32% of global supply, will now face a 25% US tariff.
India's use of Russian crude oil could potentially invite penalties, according to GTRI. The tariffs on India's USD 10 billion diamond and jewellery exports deliver a heavy blow, as value addition is barely 3-4% and such duties can turn exports instantly unviable.
In summary, the 25% reciprocal tariff implementation is likely to constrain Indian exports to the US, notably in labor-intensive sectors, risking substantial revenue losses and market share. Proactive trade negotiations, cost structure adjustments, and export diversification will be essential to cushion the impact.
- The global business community, following the news of a potential 25% reciprocal tariff implementation by the US on Indian exports, may form their own opinions, given the expected negative impact on trade relationships and labor-intensive sectors such as garments, textiles, shrimp, jewellery, and engineering goods.
- The new 25% reciprocal tariffs on US exports, as announced by President Trump, have sparked heated debates in the realm of politics, with many arguing about the impact on exports, particularly in sectors like diamonds, where India is a significant player, and the potential for a shift in US-India trade dynamics.
