The US decision to impose a 26 per cent reciprocal tariff on India could lead to a decline of $5.76 billion, translating into a 6.41 per cent contraction in exports to Washington in 2025, the Global Trade Research Initiative (GTRI) said on Monday.
The contraction will be led by a drop in exports of fish and crustaceans, which may fall by a fifth. Exports of iron and steel products may decline by 18 per cent; diamonds, gold, and related products by 15.3 per cent; vehicles and parts by 12.1 per cent; and electrical, telecommunications, and electronic products by 12 per cent, according to GTRI’s report. In 2024, India exported $89.81 billion worth of goods to the US.
On April 2, US President Donald Trump signed an executive order introducing new reciprocal tariffs, imposing additional ad valorem duties ranging from 10-50 per cent on imports from a host of countries. The baseline 10 per cent duty took effect on Saturday, with additional country-specific duties coming into force from April 9.
Commerce and Industry Minister Piyush Goyal is also expected to meet industry representatives and exporters to take stock of the issues faced by Indian exporters due to the reciprocal tariffs imposed by Washington.
Other categories expected to contract include plastics (9.4 per cent), carpets (6.3 per cent), petroleum products (5.2 per cent), organic chemicals (2.2 per cent), and machinery (2 per cent).
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However, India’s competitive position in select product segments may help cushion some of the losses. Sectors that could see modest gains include made-up textile, apparel, ceramic products, inorganic chemical, and pharmaceutical.
Certain product categories such as petroleum, solar panels, and pharmaceuticals have been exempted from reciprocal tariffs. These items account for $20.4 billion, or 22.7 per cent of India’s exports to the US. Similarly, Washington has already imposed an additional 25 per cent duty on steel, aluminium, automobiles, and automobile parts. These represent $2.2 billion, or 2.5 per cent of India’s total exports to America.
“However, the largest impact falls on the remaining basket of goods. These exports, valued at $67.2 billion or 74.8 per cent of total trade, will now be hit with a 26 per cent tariff. While Most Favoured Nation tariffs still apply, this sweeping hike is expected to reshape trade dynamics across a wide range of industries,” the report said.
Exports of electronics and smartphones to the US stood at $14.4 billion in 2024, accounting for 35.8 per cent of India’s global shipments in this category.
While the average import duty on these products is just 0.4 per cent, Indian goods are now set to face a steep tariff, raising concerns about their competitiveness in the American market, it said. India is currently the fourth-largest supplier of electronics and smartphones to the US, behind China, Mexico, and Vietnam.
“We estimate that the impact of the tariff hike (on electronics and smartphones) could reduce India’s exports to the US by 12 per cent, or roughly $1.78 billion,” it said.
Seafood exports may also be hit hard. “These products, which previously entered duty-free, now face a 26 per cent tariff. India, the third-largest seafood supplier to the US after Canada and Chile, is projected to lose ground. Exports are expected to fall by 20.2 per cent, or $404.3 million, especially as Canadian products remain tariff-free under the US-Mexico-Canada Agreement,” it said.
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The government on Monday clarified that any Indian company engaged in a sector where foreign direct investment (FDI) is prohibited can issue bonus shares to its pre-existing non-resident shareholders.
However, after the issue of bonus shares, the shareholding pattern of the pre-existing non-resident shareholder would remain the same, according to a government notification.
The move is set to give the much-needed clarity to companies in the tobacco sector that have been seeking clarity regarding the issuance of bonus shares, experts said.
Under the FDI policy, tobacco is among the eight sectors where FDI is prohibited.
“An Indian company engaging in a sector/activity prohibited for FDI, is permitted to issue bonus shares to its pre-existing non-resident shareholder(s) provided that the shareholding pattern of the pre-existing non-resident shareholder(s) does not change pursuant to the issuance of bonus shares,” said Press Note 2 issued by Department for Promotion of Industry and Internal Trade (DPIIT).
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According to the FDI policy, Indian companies can issue bonus shares to existing non-resident shareholders, subject to the sectoral caps applicable under the FDI norms.
Other sectors where FDI is prohibited includes lottery business, gambling and betting — including casinos — chit funds, Nidhi companies, trading in transferable development rights (TDRs), and real estate business or construction of farm houses.
They also include sectors that are not open to private player investment, including atomic energy and railway operations.
The clarification will be effective from the date of issue of the relevant Foreign Exchange Management Act (FEMA) notification, according to the note.
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India's exports to US may decline by $5.76 bn due to high tariffs: GTRI