India is preparing for potential economic turbulence as the United States moves forward with implementing reciprocal tariffs on April 2.
The latest report from Emkay has warned that if tariffs are set at 10%, India could see a decline of $6 billion in exports, equating to 0.16% of its GDP. However, if the US raises tariffs to 25%, the losses could surge to $31 billion.
The report suggests that a broad, country-level tariff is the most likely scenario, making India one of the worst-hit nations. Given that the US is a key trading partner, these tariffs could significantly impact India's export-dependent sectors.
Among the most vulnerable industries are apparel and gems and jewellery, which could bear the brunt of increased tariffs.
The Indian auto industry is also expected to take a substantial hit, especially with the US set to impose a 25% tariff on fully assembled cars starting April 3. Auto parts will face similar tariffs by May 3, affecting India's $6.79 billion worth of car parts exports to the US.
While some sectors are at risk, others such as pharmaceuticals and electronics may not be as severely affected as initially expected. Nevertheless, industry stakeholders are seeking more clarity on which specific products will be targeted by these tariffs.
India is actively working to mitigate the impact of these tariffs by offering tariff reductions on various US imports, including agricultural products. In trade negotiations, India has proposed lowering tariffs on almonds, cranberries, and bourbon whiskey, which are among the key US exports.
Reports suggest that India is willing to offer tariff cuts on more than half of US imports worth $23 billion, marking one of its biggest trade concessions in recent years.
According to government estimates, about 87% of India’s exports to the US—roughly $66 billion—could be affected by reciprocal tariffs. In response, India has offered to cut tariffs on select US imports ranging from 5% to 30%.
These discussions come amid growing concerns about how US President Joe Biden or a potential return of Donald Trump could further influence trade policies. Trump's past actions on tariffs, including threats of aggressive hikes, have raised fears that US trade policies may become more restrictive.
Despite the challenges, India sees an opportunity to expand its role in global supply chains. With the US imposing tariffs on China, Mexico, and Canada, there is potential for India to gain market share in low-skill product categories previously dominated by China.
India has made limited progress in high-skill manufacturing but is still positioned to benefit from shifting global trade patterns. Additionally, India is looking to strengthen negotiations in key areas such as energy and defence, leveraging its imports of US defence equipment and energy resources as part of trade discussions.
India and the US have set a long-term goal of doubling bilateral trade to $500 billion by 2030, up from the current $190 billion. Both nations aim to complete the first phase of a new trade agreement by 2025 to ease trade barriers and strengthen economic ties.
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