Donald Trump¡¯s reciprocal tariffs threaten India¡¯s top industries¡ªtextiles, gold, auto & more brace for a billion-dollar shock

Donald Trump¡¯s proposed tariffs could have a major impact on India¡¯s exports to the US. With billions of dollars in trade on the line, several industries are bracing for potential losses. The hardest-hit sectors include electronics, gems & jewellery, pharmaceuticals, automobiles & auto components, and textiles. Here's how these industries might be affected.

Electronics: India¡¯s biggest export may face a setback

India exported $11.1 billion worth of electronics to the US in FY24, making up 14% of total exports to America. The US, in turn, is the biggest buyer of Indian electronics, accounting for 32% of total shipments. A tariff hike could significantly impact this trade.

A major example is Apple¡¯s iPhone production in India. More than half of India¡¯s electronics exports to the US are mobile phones, especially iPhones assembled at Foxconn¡¯s Chennai plant. If tariffs rise, Apple may rethink its production in India, which could affect job opportunities and the country¡¯s role in global manufacturing.

Gems & Jewellery: A $9.9 billion industry in jeopardy

India is a global leader in the gems & jewellery sector, and the US is a major buyer, accounting for 30% ($9.9 billion) of India¡¯s $33 billion exports in this category. The trade includes cut and polished diamonds, studded gold jewellery, and lab-grown diamonds.

Experts state that some Indian jewellery manufacturers may even shift operations to places like Singapore, the UAE, or Oman to avoid high duties. Given that this industry is labor-intensive, a decline in exports could lead to significant job losses.

Considering this, one of the hardest-hit regions could be Surat, Gujarat, which is a major hub for diamond cutting and polishing. If tariffs increase, American buyers might choose to source diamonds from countries like Belgium or Israel, which have lower trade restrictions. This could impact the earnings of thousands of small jewellery businesses in Surat.

Pharmaceuticals: A crucial sector at risk

India is a major supplier of generic medicines to the US, accounting for 47% of the total generic drug imports by volume. The affordability of Indian pharmaceutical products makes them attractive to US buyers, making them difficult to replace.

If the tariff increase remains below 10%, analysts predict that Indian pharmaceutical stocks could react positively. However, a higher tariff could put pressure on the industry. Most pharma companies believe they can pass the added costs onto US buyers, minimizing financial damage.

For example: a company like Sun Pharma, which exports widely to the US, could be impacted. If the tariffs are less than 10%, Indian pharma stocks might not see a big fall. But if the US imposes higher tariffs, companies like Cipla and Dr. Reddy¡¯s could struggle, as their medicines would become more expensive for American buyers.

Automobiles & auto components: Indian players on edge

While the US is not a major destination for India¡¯s vehicle exports, auto component makers are more vulnerable. In FY24, 27% of India¡¯s auto component exports went to the US.

Companies like Sona Comstar, which gets 43% of its revenue from North America, and Samvardhana Motherson, which earns 18% from the US, could face challenges. Jaguar Land Rover (JLR), owned by Tata Motors, may also take a hit, as 30% of its sales come from the US. Since JLR doesn¡¯t have a manufacturing base in America, its cars will face tariffs, impacting profitability.

Textiles & apparel: A competitive industry under pressure

India exported $9.6 billion worth of textiles and apparel to the US in FY24, making up 28% of total exports in this sector. If tariffs increase, Indian products may become more expensive than those from competitors.

A prime example for this is Tiruppur, Tamil Nadu, known as India¡¯s "T-shirt capital." Many brands in the US buy cotton garments from Tiruppur. If tariffs increase, US buyers might switch to suppliers from Vietnam, which has a free trade agreement with the US. This could affect thousands of workers in Tiruppur¡¯s textile factories.

What¡¯s next? The markets monitor closely

PM Modi with Donald Trump | Credit: X

With foreign institutional investors (FIIs) closely monitoring Trump¡¯s tariff plans, market volatility is expected. However, some netizens believe that India¡¯s strong corporate fundamentals and ongoing trade talks could soften the blow. According to industry experts, a weakening rupee may also help offset some tariff pressures.

Will Trump fully implement the tariffs, or is this just another trade negotiation tactic? The answer to this is still awaited.