Trump’s Tariff Clock is Ticking: What’s at Stake for India?

'Trump Tariffs' might be the most-used term this year (so far), with April 2 being the ultimate watch date. Investors and policymakers around the world are eagerly waiting for Trump's commentary tonight, as they try to gauge the prospective bargains that might come to the table after the imposition of reciprocal tariffs.

The first three months of 2025 witnessed heightened uncertainty taking over investor sentiment. For India, it was just an added pressure as the economy was already witnessing a cyclical slowdown. While India did try to strike a deal with the US via trade negotiations, there was hardly anything concrete that came out.

Meanwhile, experts believe that the indirect effect of tariffs might weigh more on the overall supply-chain network. In the Asia region, India remains relatively less vulnerable. As per a report by Nomura, Vietnam stands out as the most exposed nation to higher tariffs, followed by Taiwan, Thailand, Malaysia, Singapore and South Korea.

"The specifics of Trump's reciprocal tariff policies remain uncertain, particularly whether they will target specific sectors or apply uniformly across the board. Currently, India imposes a 9.5% weighted average effective tariff on US exports, compared to a 3% tariff on Indian exports to the US. However, these tariffs vary across categories and subcategories," analysts at LIC Mutual Fund said.

What has India done so far?

While India took counter measures to mitigate the impact of trade tariffs, the full impact might take some time to materialise. However, India has made several concessions to the US since Trump became President. For instance, reducing the basic customs duty on motorbikes—cut from 50% to 40% for completely built-up units (CBUs) with engine capacities of up to 1600cc and from 50% to 30% for those above 1600cc.

India also removed the 6% equalization levy on online ads, benefiting American tech giants like Google and Meta. Plus, import duties on Bourbon whiskey were also slashed from 150% to 100%.

"Many Asian policymakers are stepping up on their plans to invest more in and import more from the US, lower tariffs on US imports, strengthen alliances outside the US, mitigate third country risks and position themselves to benefit from the next round of supply chain shifts," Nomura stated in a report.

Which sectors are at risk?

While sectors like pharma, auto and textiles face risk at a higher level, there is another sector that is likely to bear the brunt of Trump's tariff move.

A report by Emkay Global mentioned that sectors like auto, electronics and pharma are comparatively safer than the gems and jewellery sector. “We establish that the key susceptible sectors (auto, pharma, electronics) are far better placed than feared, whereas apparel and G&J are the most exposed,” said Emkay Global. The Gem and Jewellery Export Promotion Council (GJEPC) estimates that nearly 50% of India's exports might just wipe out with around 1-1.5 lakh at risk if the US imposes tariffs.

As for the auto sector, the US's 'reciprocal' tariff move might provide Indian exports a cost advantage. Whereas, in the pharma sector, the country continues to dominate in the generic drug category. Even if the US tries to break that dominance, its products are far more expensive than Indian generics.

As for now, a lot seems uncertain. Trump has consistently labelled India as one of the world's highest-tariffing nations. Even in a recent meeting, while praising Prime Minister Modi as a “very smart man” and a “great friend,” he reiterated his stance on India’s high tariffs. All eyes will be on Trump's commentary tonight.