Trump Tariff Hike
Washington/New Delhi: In a move that has sent shockwaves through global trade, US President Donald Trump announced sweeping tariffs on imports from over 180 countries on April 2, 2025. The decision, which includes a baseline 10% tariff on most imports, has particularly targeted India with a 26% duty—half of what India currently imposes on US goods. However, according to a new analysis by global financial firm Deloitte, Indian exporters could soon face an even steeper effective tariff rate of 27%, set to take effect from April 9, 2025.

Contents

Understanding the New Tariff Structure Why Is India Being Targeted?Sector-Wise Impact on Indian Exports 1. Textiles and Apparel: A Mixed Bag 2. Pharmaceuticals: Compliance Risks Loom 3. IT and Electronics: Semiconductors Get a Pass 4. Agricultural Exports: Big Blow for Seafood and Rice 5. Automobiles: Section 232 Tariffs Still a Threat What Can India Do Next?Market Reactions and Future Outlook Trump Tariff Hike

The new tariffs are expected to significantly impact key Indian export sectors, including textiles, pharmaceuticals, IT and electronics, agriculture, and automobiles. Deloitte warns that the increased duties could erode India’s competitive edge in the US market, forcing exporters to either absorb higher costs or risk losing business.

Understanding the New Tariff Structure

Trump’s latest trade policy imposes a blanket 10% ad valorem duty on all imports (except certain exempted goods) starting April 5, 2025. However, the bigger blow comes from country-specific reciprocal tariffs, which will take effect on April 9. Under this structure, India faces an additional 17% tariff on top of the baseline 10%, taking the total duty on Indian goods to 27%.

“The US will impose a 10% additional duty on all imports, except specified commodities, effective April 5, 2025. Furthermore, higher differentiated country-wise reciprocal tariffs on specified countries, including India, will come into effect from April 9, 2025. Accordingly, the additional ad valorem reciprocal tariff shall increase from 10% to 27% on imports from India,” Deloitte said in its analysis.

Why Is India Being Targeted?

The US has long criticized India’s trade policies, particularly its high import duties on American products such as apples, almonds, and motorcycles. Trump’s latest move is seen as an attempt to pressure India into negotiating a bilateral trade deal that could lower barriers for US exports.

Deloitte expects India to push for a quicker conclusion of the proposed trade agreement, using the tariff hike as leverage. “Tariff alignment, digital trade facilitation, and mutual recognition of standards could form the bedrock of this re-engagement,” the firm noted.

Sector-Wise Impact on Indian Exports

1. Textiles and Apparel: A Mixed Bag

India exported over $8 billion worth of textiles and garments to the US last year. With thin profit margins, even a 10-20% tariff hike could make Indian products uncompetitive against rivals like Bangladesh, Vietnam, and Sri Lanka.

However, Deloitte points out that India may still have an edge because:

Bangladesh faces a 37% tariff
Sri Lanka faces 44%
Vietnam faces 47%

“While Indian exporters will feel the pinch, they may still retain some advantage over other Asian competitors,” the report noted.

2. Pharmaceuticals: Compliance Risks Loom

India supplies over 40% of generic drugs to the US, making this sector highly vulnerable. Deloitte warns that stricter origin tracing and customs checks could create compliance hurdles for Indian pharma firms.

Adding to the uncertainty, Trump has hinted at future tariffs on pharmaceutical imports, which could further disrupt supply chains.

3. IT and Electronics: Semiconductors Get a Pass

The 27% tariff could hurt India’s IT hardware and electronic component exports. However, semiconductors—a key strategic export—have been exempted from the additional duty, providing some relief.

“India’s semiconductor exports to the US have been gaining attention due to their strategic importance in global supply chains,” Deloitte observed.

4. Agricultural Exports: Big Blow for Seafood and Rice

India ships $5 billion worth of agricultural goods to the US annually, including:

Fish and shrimp
Non-basmati rice
Vegetable oils and extracts

The 27% tariff could make these products too expensive for American buyers, forcing Indian farmers and processors to seek alternative markets.

5. Automobiles: Section 232 Tariffs Still a Threat

While most auto components are exempt from the new ad valorem duty, Deloitte warns that Section 232 tariffs (25% on certain auto imports) imposed on March 26, 2025, could still impact Indian manufacturers.

What Can India Do Next?

Deloitte suggests that India should:

Accelerate trade talks with the US to negotiate lower tariffs.
Leverage exemptions for strategic goods like semiconductors.
Diversify exports to other markets to reduce dependence on the US.
Push for mutual recognition agreements to ease compliance burdens.

Market Reactions and Future Outlook

The announcement has already weakened the rupee and triggered a sell-off in export-heavy stocks. Analysts fear that if India retaliates with counter-tariffs, it could escalate into a full-blown trade war, further destabilizing global markets.

As negotiations unfold, Indian exporters must brace for short-term pain while hoping for a long-term trade resolution.

Disclaimer: This article is for informational purposes only. The views expressed are based on Deloitte’s analysis and do not constitute financial advice. Investors are advised to consult certified experts before making any decisions, as market conditions may change rapidly.