US slaps 25% tariffs on Indian goods, but who'll pay the biggest price?

Dubai: With a new 25% tariff slapped on Indian exports to the United States, several industries will witness a shake-up—from jewellery and generic drugs to electronics and textiles.

The tariff decision, announced by US President Donald Trump, will directly impact about 10% of India’s total exports this quarter, according to analysts familiar with the government’s estimates. In 2024, India-US trade reached $129.2 billion, making the US one of India’s most important trading partners.

While final tariff rates by sector remain unclear, analysts say some industries are particularly vulnerable. Here's a simplified breakdown of the sectors most at risk:

The US is the largest market for India’s gems and jewellery, buying over $10 billion worth annually. A 25% tariff could inflate prices, delay shipments, and hit every link in the supply chain—from small artisans to major manufacturers. The industry, already under pressure from global conflicts and slowing demand, may now face job losses and reduced competitiveness.

India supplies around 40% of all generic prescriptions filled in the US, amounting to $8 billion annually. The new tariff threatens to disrupt this flow and raise costs for US healthcare providers. While Indian drugmakers hope for a lower rate—possibly 10%—analysts warn that any added cost could strain a critical part of the US pharma supply chain.

India exports large volumes of clothing, home textiles, and footwear to US retail giants like Walmart, Gap, and Costco. The sector was already seeking tariff relief to stay competitive with countries like Vietnam. Now, analysts say a 25% duty could erode profit margins, reduce order volumes, and put pressure on exporters already dealing with shrinking global demand.

India recently became a major exporter of smartphones—especially iPhones assembled locally. However, the new tariff could undercut this progress. While phones are currently exempt from the latest levies, analysts say future moves under national security laws may change that, forcing Apple and others to rethink sourcing strategies.

India imports about 37% of its oil from Russia at discounted prices. But with Trump's criticism of India’s Russia ties, refiners now face uncertainty over whether future US actions will target these energy deals. If those flows are disrupted, it could push up costs and hurt profits at major Indian oil companies.

Export-oriented sectors are expected to feel the pinch first. Around 20% of India’s goods exports go to the US, which accounts for about 2.5% of the country’s GDP. While the overall economic hit may seem small, the sector-specific damage could be significant.

Investor confidence may also take a hit, especially in mid-cap and export-heavy sectors like auto parts, tiles, industrials, and pharma. Some analysts expect capital outflows and volatility in markets.

Notably, the IT sector is not directly affected by these tariffs, but rising global uncertainty could lead US firms to cut back on tech spending. A weaker rupee, however, might cushion IT exporters, who benefit when the currency depreciates.

For now, all eyes are on the sixth round of India-US Bilateral Trade Agreement talks, scheduled for late August, which may offer more clarity, analysts say. Until then, Indian exporters will likely brace for a challenging quarter ahead.

- with inputs from Bloomberg