Major Blow to Indian Exports: Impact of Trump’s 25% Tariff On Indian Tech, Drugs, Jewellery & Textiles Sector

US President Donald Trump's decision to impose a 25% tariff on Indian exports starting August 1st is poised to impact several sectors, including electronics, pharmaceuticals, and textiles and Jewellary. This move threatens India's preferential trade status and could affect $129.2 billion in bilateral trade. The tariffs may lead to increased costs, shipment delays, and pressure on industries, potentially prompting companies like Apple to rethink their sourcing strategies.

Trump criticised India's tariffs as "among the highest in the World" on the Truth Social platform. He accused India of imposing "the most strenuous and obnoxious non-monetary Trade Barriers of any Country." Additionally, he warned of further penalties due to India's energy purchases from Russia. The announcement dashed New Delhi's hopes for preferential treatment despite early trade talks following Prime Minister Narendra Modi's visit to Washington in February.

Impact on Key Sectors

The gems and jewellery sector is particularly vulnerable, with the US accounting for over $10 billion of India's exports in this industry. The Gem and Jewellery Export Promotion Council expressed concern that the tariff could disrupt supply chains and threaten jobs. They stated that a blanket tariff would "inflate costs, delay shipments, distort pricing, and place immense pressure on every part of the value chain."

India is a major exporter of non-patented drugs to the US, with an annual export value of approximately $8 billion. Companies like Sun Pharmaceutical Industries Ltd., Dr. Reddy's Laboratories Ltd., and Cipla Ltd. derive at least 30% of their revenue from the US market. In 2022, Indian companies supplied four out of every ten prescriptions filled in the US, providing nearly $220 billion in savings to the US healthcare system over a decade.

The textile sector also faces challenges due to these tariffs. Indian manufacturers supply global chains like The Gap Inc., Walmart Inc., and Costco Wholesale Corp. The Confederation of Indian Textile Industry noted that this presents a "stiff challenge" as India will not enjoy a significant duty differential advantage compared to countries like Vietnam.

Electronics and Oil Refining Concerns

India has become a leading source of smartphones sold in the US after Apple shifted more iPhone assembly there from China. However, this strategy might be jeopardised by the new tariffs. Bloomberg Intelligence analysts Anurag Rana and Andrew Girard noted that if tariffs reach 25%, it could force Apple to reconsider its sourcing plan from India.

Indian refiners such as Indian Oil Corp Ltd., Bharat Petroleum Corp Ltd., Hindustan Petroleum Corp Ltd., and Reliance Industries Ltd. might also suffer under these tariffs. India sources about 37% of its oil imports from Russia at discounted rates, which supports refining margins. If Russian crude becomes unavailable due to tariffs, import costs will rise, affecting profits.

The final impact on Indian businesses will depend on how these tariffs compare with those levied on other competing nations. While specific sectoral tariff rates remain unclear, industries like gems & jewellery are expected to face significant challenges.

In July-September alone, about 10% of total Indian exports could be affected if tariffs exceed 25%, according to Bloomberg News citing internal calculations familiar with India's situation.

The two-way trade between India and the US was valued at $129.2 billion in 2024. However, without clarity on sectoral tariff rates or penalty levels yet available, businesses remain uncertain about future impacts.