From April 9, Indian exports will be subject to tariffs reaching 27%. (While Trump’s tariff schedule lists India’s rate at 26%, the official directive states 27%, a discrepancy noted in the case of several other nations as well.) Prior to this increase, the average US tariff rate across trading partners stood at 3.3%, among the lowest worldwide, whereas India’s was significantly higher at 17%, as per White House figures.
Despite the tariff hike on Indian goods, the US has imposed even steeper rates on Chinese (54%), Vietnamese (46%), Thai (36%), and Bangladeshi (37%) exports. Analysts at the Global Trade Research Initiative (GTRI), a Delhi-based think tank, have suggested that these developments position India favourably in sectors such as textiles, electronics, and machinery.
With higher tariffs dampening Chinese and Bangladeshi textile exports, Indian manufacturers have an opening to expand their presence in the US market. Although Taiwan dominates semiconductor production, India could gain traction in packaging, testing, and lower-end chip manufacturing—provided it strengthens infrastructure and policy support. Even a limited shift in supply chains from Taiwan, influenced by 32% tariffs, could offer India an advantage.
Machinery, automobiles, and toys, sectors currently led by China and Thailand, also present potential for relocation due to tariff pressures. GTRI researchers have indicated that India could capitalise on this by attracting investments, scaling up production, and increasing exports to the US.
Yet, the question remains—can India seize this opportunity? Rising tariffs have escalated costs for businesses reliant on global value chains, hindering India's competitiveness in international markets. Despite export growth, primarily driven by the services sector, the country maintains a substantial trade deficit, accounting for just 1.5% of global exports. Trump has frequently criticised India’s trade policies, referring to the nation as a "tariff king" and accusing it of trade abuses. The concern is that his latest tariffs will further erode the competitiveness of Indian exports.
While the US’s protectionist stance could accelerate global supply chain shifts, India needs to enhance its business environment, invest in logistics and infrastructure, and ensure policy consistency to fully leverage these changes. Should these conditions be met, India could position itself as a major global manufacturing and export hub in the years ahead.
Trade experts, however, have expressed scepticism. Biswajit Dhar from the Delhi-based Council for Social Development has observed that Malaysia and Indonesia may be in a better position than India to benefit. He has also pointed out that although India may regain some ground in garment exports following Bangladesh’s tariff hike, the sector has long been neglected, with little investment in capacity building. Without such efforts, he questioned how India could truly capitalise on these tariff-driven shifts.
Since February, India has intensified efforts to strengthen trade ties with the US. The country has pledged $25 billion in energy imports, positioned Washington as a key defence supplier, and explored F-35 fighter jet deals. To ease trade tensions, it has eliminated the 6% digital advertising tax, reduced bourbon whiskey tariffs from 150% to 100%, and cut duties on luxury cars and solar cells. Meanwhile, Starlink, Elon Musk’s satellite internet venture, is approaching final approval in India. Extensive trade negotiations are also underway to address the US’s $45 billion trade deficit with India.
Nonetheless, India has not escaped the impact of the tariff war. Abhijit Das, former head of the Centre for WTO Studies at the Indian Institute of Foreign Trade, has cautioned that there had been hope ongoing trade talks would shield India from these tariffs. Facing them now, he argued, represents a significant setback.
One sector that has avoided additional tariffs is pharmaceuticals, which comes as a relief for Indian generic drug manufacturers. India supplies nearly half of the generic medicines used in the US, where these lower-cost alternatives account for 90% of prescriptions.
However, exports of electronics, engineering goods—including automobile parts and industrial machinery—and marine products could suffer. This is particularly concerning for electronics, given India's substantial investments in "production-linked incentives" (PLI) schemes aimed at bolstering local manufacturing.
Dhar has voiced concerns over whether Indian exporters, particularly small manufacturers, can withstand a 27% tariff increase. He noted that high logistics costs, rising business expenses, and weakening trade infrastructure compound the challenge, leaving India at a distinct disadvantage.
Many believe these tariffs serve as a bargaining tool in Washington’s trade negotiations with India. A recently released report from the US Trade Representative has underscored American frustrations with India’s trade policies. Published two days ago, the document highlights strict import regulations on dairy, pork, and fish, which require non-GMO certification without scientific basis. It also criticises slow approvals for genetically modified products and price caps on stents and implants.
India has also been placed on the ‘Priority Watch List’ due to intellectual property concerns, with the report citing weak patent protections and the absence of trade secret laws. Additional concerns regarding data localisation mandates and restrictive satellite policies have further strained trade relations. US officials believe that if these barriers were removed, American exports to India could increase by at least $5.3 billion annually.
Dhar has remarked that the timing of these developments is particularly unfavourable, as they unfold amidst critical trade negotiations. He emphasised that this is about more than just market access; rather, it reflects broader trade policy dynamics. He also warned that overtaking competitors such as Vietnam or China would not happen overnight—building competitiveness requires sustained effort over time.
