From textiles to tech: How US tariffs are shaping India’s export woes

By: Shantanu Bhattacharji

As US tariffs squeeze China, India eyes export gains in textiles, footwear, and steel. A government report sees scope for lasting trade advantage—if New Delhi can navigate tariff diplomacy amid domestic political resistance.

Donald Trump’s tariff onslaught may be rattling global trade, but India is positioning itself to capitalise. During Prime Minister Modi’s February visit, New Delhi and Washington agreed to push for an early trade deal, with India reportedly ready to slash duties on mor than $23 billion worth of US exports.

With China facing steeper tariffs, India sees an opening. Sectors such as textiles, apparel, footwear, and steel are poised to gain US market share, according to an internal government report. If New Delhi plays its cards right, it could convert tariff disruption into a structural trade advantage. However, balancing tariff cuts with domestic political pressures won’t be easy.

Analysts expect that there is a major possibility of accelerated bilateral talks and targeted export incentives for sectors where India has comparative advantage. The challenge will be domestic: balancing liberalisation with protectionist instincts. If India can thread that needle, it could emerge as a trade winner in a world turned inward.

Nearly $14 billion in electronics and over $9 billion in gems and jewellery, both crucial for foreign earnings, now face heightened US scrutiny. While auto parts and aluminium have avoided the fresh 26 per cent duties, they remain burdened by existing 25 per cent tariffs, offering scant relief.

For New Delhi, the warning is loud and clear: key export pillars are vulnerable. To hold its ground in the American market and prepare for prolonged trade friction, India needs to move swiftly—overhauling export incentives and expanding its global buyer network.

EY has conducted a sector-wise analysis of how the latest wave of US tariffs will ripple through India’s export economy. The findings highlight sharp disparities across industries—while pharmaceuticals remain untouched, high-value sectors such as electronics, gems and jewellery, and textiles are squarely in the firing line.

Here’s How US Tariffs Are Hitting Indian Exports, Sector by Sector

Gems & Jewellery

Exports: $9.2 billion
Tariffs
Before: 5.5 per cent to 13.5 per cent
After: 31.5 per cent to 39.5 per cent

The steep tariff hike poses a clear cost challenge for India’s gems and jewellery exporters. However, New Delhi retains some competitive edge, as rivals like Beijing face even steeper duties. Still, under the USMCA framework, Canada and Mexico now enjoy preferential access, eroding India’s relative position in the US market.

Textiles

Exports: $9.5 billion
Tariffs

Before: 6 per cent to 9 per cent
After: 32 per cent to 35 per cent

The textile industry is set to feel the squeeze from the US retaliatory tariffs, with duties jumping sharply. Yet, despite the setback, Indian exporters may retain a pricing edge, as competing nations such as China, Vietnam, and Bangladesh are facing even steeper tariff hikes in the US market.

Telecom Equipment

Exports: $6 billion
Tariffs

Before: 0 per cent
After: 26 per cent

The sector now faces a steep 26 per cent tariff, up from zero, tightening margins for Indian exporters. However, India remains relatively competitive, with China and Vietnam facing even higher duties.

To cushion the impact, the Centre must unveil solutions like fast-tracking the Mission 500 export initiative and sealing the Bilateral Trade Agreement (BTA) by year-end. Extending the Production-Linked Incentive (PLI) scheme beyond 2026 could further support the sector’s resilience.

Pharmaceuticals

Exports: $8.73 billion

Tariffs
Before: 0 per cent
After: 0 per cent

The sector has emerged unscathed, with tariff exemptions granted under Annexure II of the executive order. Most exports, classified under Chapter 30, remain protected as they fall within the covered list in Annexure I. The zero-duty status preserves India’s stronghold in the US market for affordable generics and essential medicines.

Agriculture & Food Products

Exports: $5.5 billion

Tariffs

Before: 4 per cent to 5 per cent
After: 30 per cent to 31 per cent

The huge rise in tariffs puts pressure on agri-food exports, despite retaining some cost competitiveness over select rivals. However, Canada, Mexico, and Latin American countries enjoy a stronger foothold in the US, thanks to lower tariffs and preferential access under trade pacts like USMCA.

To level the playing field, India must accelerate efforts to finalize the US-India BTA BTA, offering much-needed support to the sector.

Auto Parts

Exports: $2.1 billion

Tariffs

Before: 2.5 per cent
After: 27.5 per cent*

The auto parts now face a steep 25 per cent tariff under Trump’s trade measures, significantly raising export costs. Unlike in other sectors, there’s little duty arbitrage—India faces similar tariff burdens as Asian competitors like China.

To restore competitiveness, India should push for a concessional rate under a future BTA with the US.