Trump Reciprocal Tariff: India Heaves A Sigh of Relief, Certain Sectors Poised for Growth 

US President Donald Trump has announced 26% reciprocal tariff on all Indian imports, with certain exceptions in sectors like pharmaceutical and IT services. However, experts believe that there is a silver lining to this situation and India will continue to enjoy a competitive advantage over most other countries.

As highlighted by several trade experts and industry bodies, the imposition of higher reciprocal tariffs by the United States on several Asian countries, including China, Vietnam, Taiwan, Thailand, and Bangladesh, also provides an opportunity for India to strengthen its position in global trade and manufacturing.

The tariff overhaul, announced on April 2, is part of the administration's broader strategy to reduce the US trade deficit and encourage domestic manufacturing. As of April 5, 2025, a universal 10% tariff will be applied to all imported goods, to be replaced by country-specific rates from April 9. 

Specifically, India will incur a 25% tariff on steel, aluminium, and automotive products. However, key sectors such as pharmaceuticals, semiconductors, copper, and energy products will remain unaffected. For other goods, India will be subject to a baseline tariff of 10% from April 5-8, before the country-specific rate rises to 27% starting April 9.

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India to Enjoy A Competitive Advantage 

While there has been a growing concern among various Indian exporters in the previous months regarding the imposition of reciprocal tariff, there has been a sigh of relief after Trump announced the reciprocal tariff. India has been heavily criticised by US President Donald Trump for levying high tariffs on American exports to India and described the tariffs by India as "very very tough". However, India has been levied with a moderate reciprocal tariff as the tariff rate varies from 10% to nearly 50% for various countries. 

"With the US setting a relatively lower reciprocal tariff rate of 27% on Indian goods—compared to 54% on China, 46% on Vietnam, 37% on Bangladesh, and 36% on Thailand—India gains a natural competitive advantage in several key sectors," said Ajay Srivastava, former trade ministry official and founder of the think tank Global Trade Research Initiative (GTRI). 

Alongside, as highlighted by NITI Aayog in its recent report, the turmoil in countries like Bangladesh would further create a room for Indian for better expansion in the international market.  

Similarly, sectors like pharmaceuticals, semiconductors, copper, or energy products have been barred from any tariff. However, industry leaders cautioned that India needs to take initiative to boost export initiatives to keep abreast with the current situation. 

"Net-net, it appears India's export competitiveness to the US market stands far less impacted on a relative basis. Yet our industry should make concerted  efforts to increase export efficiency and value addition, to mitigate the impact of these tariff," added Sanjay Nayar, ASSOCHAM President. 

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Sectors to Benefit the Most 

While sectors like auto, aluminum, and steel need to figure out how they can mitigate the challenges arising due to reciprocal tariff, some sectors like apparels, textiles, and semiconductors are certainly going to benefit. 

For instance,  high tariffs imposed on Chinese and Bangladeshi exports can help Indian textile manufacturers to gain market share, attract relocated production, and increase exports to the US India’s strong base in textile production, coupled with lower tariffs, could drive greater global demand and new investments in the sector.

Mithileshwar Thakur, Secretary General, Apparel Export Promotion Council (AEPC) said to Outlook Business, "Despite the steep hike of tariff for India, it prima facie seems to be a case of India advantage for the Apparel sector, with our major competing countries like China, Bangladesh, Vietnam, Cambodia, and Sri Lanka having been slapped higher reciprocal tariffs by USA.”

At the same time, in the electronics, telecommunications, and smartphone industries, nations such as Vietnam and Thailand are poised to lose their cost advantage as a result of the hefty U.S. tariffs. This shift presents an opportunity for India, which has already positioned itself as a key player in electronics manufacturing through initiatives like the Production-Linked Incentive (PLI) scheme.

As global companies look to mitigate risks by diversifying supply chains away from high-tariff regions, India stands to become a prime destination for new manufacturing hubs and component assembly operations. As highlighted by GTRI founder, "Even a partial shift of supply chains from Taiwan due to tariffs (32%) could benefit India if supported by adequate infrastructure and policy support."

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The Road Ahead

While some of the sectors are likely to benefit or rather remain somehow unaffected due to the reciprocal tariff, India still needs to take precautionary policy measures to ensure Indian exporters could escape the heat of the tariff. 

The commerce ministry has already confirmed on Wednesday that  the department will have meetings with all stakeholders, including Indian industry and exporters, to take feedback of their assessment of the tariffs and assessing the situation.

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With the right policy measures, India could even turn the threat in some sectors into an opportunity. At the same time, India needs to remain cautious of the dumping that could happen from countries levied with high tariffs. 

"We're poised to gain an edge over Vietnam and China in the electronics sector and will most likely outperform these countries. But we must be vigilant about China's electronic waste dump and should exercise a high level of concern . We do not, at any point of time want to turn into a trading colony of China," said Ajai Chowdhry, Founder HCL , Chairman, EPIC Foundation.