India could face export losses of up to $31 billion if the US imposes reciprocal tariffs, with the most likely scenario being broad country-level tariffs. The US is set to announce reciprocal tariffs on April 2, 2025.
If a 10% broad country-level tariff is implemented, India’s export losses could amount to $6 billion, equivalent to 0.16% of GDP. If tariffs rise to 25%, these losses could escalate to $31 billion, according to an Emkay Global report.
India’s total exports to the US stood at $77.5 billion in FY24, accounting for 2.1% of GDP. A broad country-level tariff is viewed as the most probable outcome due to its simplicity, although sector-level and commodity-specific tariffs remain possible, albeit less likely due to their complexity.
Key vulnerable sectors include auto, pharma, electronics, gems/jewellery, apparel, and seafood. However, Emkay Global’s assessment suggests that auto, pharma, and electronics are relatively better placed, with sectoral nuances insulating them from the majority of tariff impacts.
On the other hand, gems/jewellery and apparel remain the most exposed and may require targeted negotiations to mitigate potential losses.
Limited opportunities
India’s opportunities to gain from the broader US tariff war remain limited. Despite China vacating a portion of the low-skill manufacturing space post-Covid, India has captured only a small share of that segment and continues to lag in high-value product chains.
China’s exports to the world are more complex, with 75% falling into the high-complexity category, compared to India’s 45%.
Tariffs on Mexico and Canada offer some opportunities in sectors such as refined petroleum and auto components. However, the highly integrated nature of North American supply chains means any gains for India would take time to materialise.
Three possible scenarios
Broad country-level tariffs: The most likely and simplest option but potentially the most damaging, with all of India’s US exports subject to a flat tariff.
Sector-level tariffs: A more complex approach, less likely, but with a relatively lower impact.
Commodity level tariffs: The least likely scenario due to high complexity, with varied impacts across different sectors.
India will need to intensify its efforts to strengthen its global market share to mitigate the potential impact of tariffs. While reciprocal tariffs from the US may create short-term disruptions, they are also likely to trigger another prolonged phase of trade negotiations.
India navigates these challenges, the focus will be on protecting key sectors and finding opportunities to strengthen its export competitiveness.
