Donald Trump’s Tariff Tsunami: India Braces For $31 Billion Economic Fallout As Tariffs Impact

The US President Donald Trump has done his best as far as unleashing a 26% reciprocal tariff on goods imported from India are concerned.  According to a report by Emkay Global dated March 25, a 25% broad tariff could slash $31 billion from India’s GDP—roughly 0.72% of India’s GDP. In FY24, the total exports from India to the US stood at $77.5 billion. 

“We estimate India would potentially lose ~$31 bn in exports to the US at 25% broad tariffs,” Madhavi Arora, Chief Economist, Emkay Global Financial Services said in a report.
While announcing the tariffs, Trump also touched upon India’s high tariff and said, “Their Prime Minister Narendra Modi just left (US recently)...he is a great friend of mine, but I said to him that 'you're a friend of mine, but you've not been treating us right'. India charges us 52 per cent, so we will charge them half of that - 26 per cent.” 

 

India's Export Dependency

The US has been a crucial market for Indian exports, but its significance has fluctuated over the last 25 years. In FY00, the US accounted for around 23% of India’s exports, which fell to a low of 10% in FY11 before rebounding to nearly 19% in FY25TD.

The rise of China, especially post its WTO entry in 2001, prompted India to pivot toward Asia, although developed markets have made a comeback in the past decade. Interestingly, India’s imports from the US have remained stable, ranging from 7% in FY00 to around 6% in FY25TD.

Relief for Pharma, Pain for Electronics

In a surprising reprieve, pharmaceutical exports are exempt from the tariff hike. This is good news for major Indian players like Sun Pharma, Dr Reddy’s Laboratories, Aurobindo Pharma, Mankind Pharma.

The electronics sector, however, is set to suffer—32% of India’s electronic exports in FY24 were US-bound. Meanwhile, Apple may find it challenging to maintain its Indian assembly operations, given Trump’s move to impose a 34% reciprocal tariff on top of the existing 20% duty on Chinese imports.

Tariff Exemptions

But some industries have escaped the brunt of Trump’s tariff storm. Steel, copper, bullion, energy, and specific minerals not available in the US remain exempt.