Donald Trump’s 50% Tariffs Threaten India’s $80 Billion Auto Component Industry: Reports

The Indian auto component and tyre industries are bracing for a major setback as the United States moves ahead with steep tariff hikes on imports from India. President Donald Trump’s decision to impose duties of up to 50%—effective August 27, 2025—is set to hit nearly 27% of India’s auto component exports and 17% of tyre exports. Valued at $80.2 billion, India’s auto component industry has enjoyed strong export momentum, with shipments to the US growing at an 11% CAGR between FY18 and FY24. North America remained the top destination in FY25, accounting for $7.35 billion of exports, up 8.4% year-on-year. The US alone contributed 27% of total exports, while imports from the country were just 7%.

Uneven tariff structure 

Under the revised regime, components falling under Section 232 of the US Trade Expansion Act—such as engines, drivetrains, and electrical assemblies for cars and light trucks—will continue to face a uniform 25% duty, similar to other exporting nations. However, parts supplied to commercial vehicles, off-highway machinery, construction and farm equipment will now attract a punitive 50% tariff.

This higher duty directly impacts exporters like Bharat Forge, which supplies to Caterpillar, Volvo, and John Deere, as well as tyre makers, for whom the US accounts for a sizeable replacement market, as per research reports. Ratings agency ICRA warned that India’s previous edge over China in tyre exports could be eroded, especially as peers such as Vietnam and Indonesia enjoy preferential tariffs.

Margin pressure and strategic Risks

Analysts at India Ratings and Research (Ind-Ra) flagged that while OEM-linked contracts may be shielded in the short term due to long-term agreements, the replacement market could see immediate strain.

“The newly imposed US tariffs could disrupt the growth momentum of India’s auto component exporters… the industry faces pricing pressure and margin risks as India’s competitive advantage erodes,” said Shruti Saboo, Director, Corporates at Ind-Ra.

Suppliers may be compelled to explore nearshoring, particularly in Mexico, which benefits from zero tariffs under the United States-Mexico-Canada Agreement (USMCA)USMCA trade pact and offers lower labour costs. However, the capital outlay for such relocations would squeeze profitability, as per numerous reports.

Also Read: Despite Tariffs and Wars, India's Auto Component Industry Grows Nearly 10% in FY25, Post Trade Surplus of $453 Million | Republic World

Automakers and tyres most exposed

Jaguar Land Rover (JLR), Tata Motors’ UK-based subsidiary, faces significant exposure. The US contributed 33% of JLR’s volumes in the first nine months of FY25 and 23% of revenue in FY24. Any cost escalation from tariffs could dent demand in its key market. The tyre industry, where the US constitutes 17% of exports, also stands vulnerable to demand shifts in the replacement segment.

Global trade context 

The tariff hike undercuts India’s gains from the China+1 strategy, which had encouraged global OEMs to diversify sourcing away from China. While Beijing also faces high tariffs, its scale still ensures competitiveness. In contrast, Southeast Asian nations face only 15–20% duties, with Mexico emerging as the biggest winner.

Outlook

With exports forming 8% of India’s auto component industry’s revenue, analysts expect near-term disruption, especially in the replacement and off-highway segments. Experts suggest suppliers diversify markets, enhance cost efficiency, and explore regional manufacturing to weather the storm.

“Rationalising geographies and building resilience will be critical for India’s auto component exporters in navigating this tariff shock,” Ind-Ra said.