At present, the US levies an advert valorem obligation of 25% on Indian items. Nevertheless, it has imposed an extra 25% tariff that can take impact from August 27, bringing the full tariff on Indian merchandise to a considerable 50%. The extra advert valorem, if carried out, may have significant influence on sure sectors and stays monitorable.
The textiles, gems and jewelry and seafood industries, which account for 25% of India's whole exports to the US, are prone to be essentially the most affected. MSMEs have greater than 70% share in these sectors and shall be hit arduous. One other sector prone to face the warmth is chemical compounds, the place MSMEs have a 40% share.Says Pushan Sharma, Director, Crisil Intelligence, “Partial absorption of the elevated product costs as a result of greater tariffs will put stress on MSMEs, squeeze their already-slim margins and pose a fabric problem to their competitiveness. As an example, these into readymade clothes (RMG) are anticipated to lose floor within the US
because the tariff will increase to 61%, together with 50% further advert valorem obligation, in contrast with friends in Bangladesh and Vietnam tariffed at 31%. The Tirupur cluster, which accounts for over 30% of India's RMG exports, shall be severely impacted as ~30% of its exports are to the US.”
Equally, within the gems and jewelry sector, MSMEs in Surat, which dominates diamond exports with over 80% share, will really feel the tariff shock. As such, diamonds account for over half of the nation's gems and jewelry exports, and the US is a serious client of Indian diamonds, comprising practically a 3rd of exports.
Seafood MSMEs shall be deprived following the imposition of a 50% tariff as they face extreme competitors from Ecuador, which is geographically nearer to the US and has been levied a a lot decrease tariff of 15%.In chemical compounds, too, India faces stiff competitors from Japan and South Korea, which have decrease tariffs. In auto parts, the influence is anticipated to be marginally unfavourable because the US accounts for less than 3.5% of India's whole manufacturing. MSME suppliers, which offer parts to bigger gamers that export to the US, shall be impacted. The influence shall be significantly pronounced for MSMEs supplying parts for gearbox and transmission gear, which account for a fourth of India's auto element exports and have a major US publicity of 40%.To make certain, the tariff hikes come at a very difficult time for many of those sectors. As an example, RMG exports have recovered after declining 7% on-year in fiscal 2024 and logged 13% on-year progress in fiscal 2025, albeit on a low base. The gems and jewelry sector has seen exports decline 10%-a-year over the previous two fiscals on a compound annual progress fee foundation.Of the 5 sectors anticipated to see significant influence, gems and jewelry has the best publicity to the US at ~$10 billion. Whereas we count on export volumes to contract, the influence will not be absolutely mirrored in income phrases due to a probable runup in gold costs and sustained home demand.
