As US President Donald Trump enforces a 27% tariff on Indian goods, economists and industry experts suggest that Indian exporters will face relatively fewer challenges compared to other major Asian economies. Among Emerging Markets (EMs) in Asia, India’s tariff rates remain among the lowest, second only to the Philippines.
Economic analysts attribute this to India’s inward-focused economy, which is less reliant on exports compared to nations like China, Japan, Vietnam, and Sri Lanka.
“This is expected to have a significant impact on US inflation and global trade dynamics. Exporters from India are likely to face relatively less trouble, as among major EMs in Asia, tariffs on US imports from India are the lowest (26% + 10% baseline), barring the Philippines (17% + 10% baseline),” said Sonal Badhan, Economics Specialist at Bank of Baroda.
Reacting to the new tariff regulations, industry body ASSOCHAM noted that the move will lead to a major reshaping of global trade and manufacturing value chains.
“Tariffs unveiled by President Trump last night would bring a major realignment in global trade and manufacturing value chains. India has been placed somewhere in the middle of the tariff rates at 26% in addition to 10% baseline duties, which needs to be assessed for its real impact,” said ASSOCHAM President Sanjay Nayar.
Debopam Chaudhuri, Chief Economist at Piramal Group, suggested that India should capitalize on its inward-driven economy by ensuring strong domestic liquidity.
“Amidst these developments, inward-dependent economies like India should focus on bank liquidity to ensure lending support to domestic retail borrowers and small business owners, thereby sustaining domestic consumption,” he stated.
Kunal Chaudhary, Tax Partner at EY India, highlighted the dual impact of the new tariffs on Indian manufacturing and exports.
“On one hand, the relatively lower tariffs on Indian goods compared to those on China, Thailand, and Vietnam create a favorable arbitrage opportunity for Indian exports. However, on the other hand, Indian manufacturers may face intensified competition in other markets, as countries that traditionally focus on the US may shift their trade efforts elsewhere,” said Chaudhary.
Under the new tariff structure, Indian goods will be subjected to a 25% tariff on steel, aluminum, and auto-related products, while pharmaceuticals, semiconductors, copper, and energy products remain exempt from additional duties. All other Indian exports will be taxed at a reciprocal tariff rate of 27%, slightly higher than the previously reported 26%.
With the global trade landscape undergoing significant shifts, experts stress the need for India to strategically navigate these changes while strengthening its domestic economic resilience.