Smartphones, Pharma, Jewellery: How Trump’s 25% Tariff on India Affects Key Sectors

US President Donald Trump has hit the Indian markets by announcing a 25% tariff on all export goods from the country, starting from August 1. The move has hit the critical Indian export sectors, ranging from smartphones, pharmaceuticals, auto parts and engineering goods, jewellery and many more.

Taking to his social media account on Truth Social, Trump wrote, “…while India is our friend, we have, over the years, done relatively little business with them because their Tariffs are far too high, among the highest in the World, and they have the most strenuous and obnoxious non-monetary Trade Barriers of any Country.”

His announcement comes just days after the fifth round of trade talks concluded between the two countries. He further threatened at additional penalties related to India’s purchases of Russian defence and energy supplies. Here’s a look at the worst hit sectors:

India’s Smartphone Sector

One of worst affected sectors due to the US tariffs will be the hardware products like smartphones, electronics, and components. Following the country’s Production-linked incentive (PLI) scheme, India’s smartphone expoets to the US saw a significant surge in FY2025, taking over petroleum and diamonds. As a result of this action, Apple’s iPhones, which are now increasingly assembled in India for US markets may witness price hikes or supply delays, if they fall under the new tariff slab.

Recently, India has also overtaken China to become the largest exporter of iPhones to the United States in the second quarter of 2025, making a pivotal shift in global supply chains. This transformation was a direct impact of Apple’s strategic move to expand iPhone manufacturing in India as part of its “China Plus One” strategy, amid increasing US–China trade tensions. Thereby, a 25 per cent tariff could severely impact that growth and also bring down India’s momentum in fast-growing tech manufacturing exports.

Pricing Shock for Pharmaceuticals

In FY2025, India exported over $10 billion in generic drugs and APIs to the US. The new tariffs can worsen drug shortages and lead to surge in process in the US healthcare system if pharma products aren’t exempted, as done in certain EU trade deals.

The dependence of US on Indian generic drugs makes this a risky situation for both the countries. 

High Risk for Auto Parts and Engineering Goods

India exported $2.2 billion worth of auto parts and components to the US in 2024. Finished vehicle exports remain marginal at $10 million, but parts shipments will now face the full 25 per cent tariff.

Around $2.2 billion worth of auto parts and components was exported to the US from India in 2024. For finished vehicle exports, the numbers remain marginal at $10 million but parts shipments will now face the full 25 per cent tariff. This may largely affect India’s engineering goods sector, which is a key driver of manufacturing and Make in India-linked exports.

Commenting on this sector, Manoj Mishra, Partner and Tax Controversy Management Leader at Grant Thornton Bharat said, “The US is one of the largest destinations for India’s engineering goods, with exports reaching nearly USD 109.3 billion in FY 2023-24. The newly imposed 25% tariff is a setback, particularly for MSMEs that dominate exports of industrial machinery, and electrical equipment. These products are highly price-sensitive, and such duties can quickly erode India’s cost competitiveness.” He further said that a timely resolution through trade talks, along with targeted support measures, will be key to minimising disruption and sustaining export momentum in this crucial sector.

Narrowing Profit Margins for Jewellery Exports 

India’s gems and jewelley exports in FY25 stood at around $12 billion and US accounted for about 30 per cent of that. With tariffs already at 27 per cent, the additional 25 per cent surcharge will hugely narrow profit margins and may also lead to large number of order cancellations or supplier switching.

Talking about the impact on jewellery exports, Mishra said, “The 25% tariff imposed from August 1 is a major setback and could lead to deferred orders, squeezed margins, and a shift in sourcing to lower-tariff countries. This poses a risk to jobs and earnings across major jewellery hubs like Surat and Mumbai. Swift trade engagement and targeted policy support will be key to mitigating the impact and preserving India’s leadership in the global gems and jewellery value chain.”

Mounting Pressure on Textiles and Apparel

With apparel exports to the US touching $10.8 billion in 2024, India is highly dependent on the American market. Thereby, a 25 per cent tariff on top of the existing 10–12 per cent rates, can make Indian garments less competitive. Additionally, US buyers may shift sourcing to Vietnam or Bangladesh, risking the orders and jobs in India’s labour-intensive textile sector.

Hit at Shrimp and seafood exports

The United States is the biggest buyer of shrimp from India, importing nearly one-third of India’s total $7.2 billion marine exports. As a result of the tariff move, Indian shrimp market’s price competitiveness may reduce against Latin American suppliers. This comes after the US criticism on India’s high MFN tariffs on agricultural goods, mentioned frequently by the Trump administration as a trade irritant.