Impact of Trump’s 26% reciprocal tariffs on India

The 26% tariffs imposed by the US present a significant challenge to India’s exports, given that the US is India’s largest trading partner, accounting for 18% of total goods exports. The speed and scale of these tariff hikes could further slow global growth, create market uncertainty, and pressure businesses worldwide.

While India is better positioned than many other economies, these tariffs can potentially impact domestic industries, disrupt trade flows, and squeeze profit margins.

As the geopolitical and economic landscape evolves, India must strategize swiftly, leveraging trade diplomacy, domestic policy shifts, and industrial resilience to mitigate risks and maintain its competitive edge in global trade.

Negotiating a bilateral trade deal could ease pressure, while adjusting import tariffs on select US goods may address concerns. India could navigate a dual-track approach—balancing negotiations and countermeasures to safeguard its economic interests. Fortunately, both India and the US are eager to expand bilateral trade to $500 billion, creating opportunities for a mutually beneficial agreement and interested to continue the discussions on agreement.

Sectoral impact
Semiconductors & Pharma: Spared from tariffs, recognizing their foundational role in global supply chains and public health.

Electronics & Electricals: Tariffs may impact India’s booming exports, but India could remain competitive as China, Vietnam, Taiwan and Thailand face even higher tariffs. India’s low electronics imports from the US provide room for tariff adjustments to maintain trade balance.

Auto Components: A high-risk sector, as India’s auto component exports are booming. Increased tariffs could slow the industry’s momentum and other impacted nations could increase export to India compared to US.

Global trade and economic consequences
Trump’s tariffs are expected to generate billions in US customs revenue and support his vision of a "golden age" for American jobs and manufacturing. However, warning sign of inflationary pressures, global trade disruptions, Increased good prices for US consumers and recession risks. The speed and scale of these tariff hikes could further slow global growth, create market uncertainty, and pressure businesses worldwide.

Overall: The government, industry bodies, and corporates face a crucial challenge in balancing business growth and economic development. Yet, every challenge presents an opportunity, and solutions are always within reach. Donald Trump's 26% reciprocal tariff poses a significant hurdle, but India can respond proactively through swift action, strategic planning, and strong negotiations to mitigate its impact and safeguard trade interests.

IESA remains committed to working closely with the Ministry of Electronics & IT, and the Ministry of Commerce & Industry, to develop strategies that minimize risks and position India ahead of global competition.

-- Ashok Chandak, President of IESA.