India‘s Export Reliance on the US Faces New Risks Under Potential Trump Tariffs
New Delhi - India’s burgeoning export sector, especially in electronics and pharmaceuticals, is facing increased uncertainty as donald Trump signals a potential shift in trade policy should he return to the white house. While currently benefiting from tariff exemptions on key goods, experts warn that these could be rolled back, impacting India’s economic growth and competitive edge.
India recently surpassed China as the leading supplier of smartphones to the United States in the second quarter, a surge driven by Apple’s increasing assembly operations within India. This success, though, is currently protected by temporary tariff exemptions on electronics – a measure implemented by Trump himself earlier this year, covering smartphones, computers, and other electronic devices. Indian exports of electronic goods to the US have already seen notable growth, more than doubling to $2.76 billion in March alone.
However, this reprieve may be short-lived. Oxford Economics lead economist Alexandra Hermann cautions that these exemptions are vulnerable to change. The potential re-imposition of tariffs could considerably hinder India’s momentum in the electronics market.
The pharmaceutical sector presents an even more precarious situation. While currently tariff-free, Trump has publicly threatened to impose ample duties on Indian pharmaceutical exports, starting with a “small tariff” and perhaps escalating to a staggering 250%. This poses a significant risk given India’s heavy reliance on the US market, with pharmaceutical exports to the US exceeding $10.5 billion in the fiscal year ending March 2025 – representing nearly 35% of the sector’s total shipments. Hermann highlights the sector’s vulnerability, noting that while India’s overall chemical exports have limited US exposure, the pharmaceutical segment is heavily dependent on the American market.beyond electronics and pharmaceuticals, India also exports steel and aluminum to the US, which are already subject to existing tariffs under a separate executive order.
The core challenge for India lies in its limited ability to diversify away from the US market. According to Michael Wan, senior economist at MUFG Bank, while the US has option sourcing options, India faces greater difficulty finding replacements for the American market across various sectors.India’s competition varies by industry: Europe in pharmaceuticals,Vietnam and Mexico in electronics,and several Southeast Asian nations – Cambodia,Sri Lanka,Bangladesh,and Vietnam – in textiles. Competition in gems and jewelry comes primarily from Israel. Wan warns that sustained tariff differentials favoring other nations could erode India’s export competitiveness.
Recent tariff adjustments by Trump demonstrate this trend. Vietnam, for exmaple, has seen its tariffs lowered to 20% from 46%, while Thailand, Bangladesh, and Cambodia have also benefited from reduced rates. Currently, approximately 32% of India’s exports to the US are exempt from tariffs, but this advantage could quickly disappear.
The potential for increased tariffs underscores the need for India to proactively explore diversification strategies and strengthen its trade relationships with other key global markets to mitigate the risks posed by a shifting US trade landscape.
