Impact of Trump’s 26% Tariff on Indian Imports: Key Affected Sectors
The Trump administration recently announced a 26% tariff on all products imported from India. This is part of a wider plan that includes similar tariffs on over 180 countries. The idea is to make trade “fair” by charging the same rate other countries charge the US. This announcement came on April 2nd and was called “Liberation Day.”
How This Compares to Other Countries?
- India: 26%
- European Union: 20%
- Japan: 24%
- South Korea: 25%
- China: 245%
While China is hit harder, India is still among the more heavily affected countries, which has raised concerns about how this will affect India’s trade with the US.
Immediate Market Reaction in India:
- Stock markets dropped: Sensex fell by over 500 points, and Nifty50 dropped below 23,200.
- Rupee weakened, trading around ₹85.69 per dollar.
- Overall, Indian markets reacted negatively.
Impact by Sector:
Pharmaceuticals:
- India exports around $12.2 billion worth of pharma products to the US.
- Good news: The sector has escaped the 26% tariff for now.
- Stocks like Sun Pharma, Cipla, Dr. Reddy’s, and others saw a rise.
- Experts warn the sector may still face tariffs in the future.
Automobiles:
- Automobiles make up about 3% of India’s exports to the US.
- The 26% tariff could:
- Reduce demand for Indian vehicles
- Make Indian cars less competitive in the US
- Cause job losses and supply chain problems
- Nifty Auto index dropped 64% after the announcement.
IT and Services:
- The IT sector was hit hard, with Nifty IT dropping over 3%.
- Fears of a US recession and lower spending are also contributing to this drop.
- Analysts have become cautious about this sector.
Other Manufacturing & Exports:
- Sectors like electronics, machinery, gems and jewellery, steel, and refined petroleum may face more challenges.
- India’s overall GDP could take a 5% hit, as predicted by Macquarie.
What Can Be Done?
- India is discussing a bilateral trade deal with the US to reduce the impact of these tariffs.
- Indian exporters may:
- Pass costs to consumers
- Look for other markets
- Absorb losses
Experts say the 26% tariff, while high, is not the worst globally. It also leaves room for future negotiations.
Final Thoughts:
- The sectors most affected are automobiles, IT, and general manufacturing.
- Pharma has escaped for now.
- The overall impact on India’s economy may be limited, as the most affected exports make up only 1.1% of GDP.
- However, this could increase market volatility, pressure the rupee, and reduce foreign investments in the short term.
Note: On April 9, 2025, President Donald Trump suspended the implementation of elevated “reciprocal” tariffs—ranging from 11% to 50%—for 90 days on imports from most countries. However, a baseline 10% tariff remains in effect for all imports, and tariffs on Chinese goods have been increased to 145%
Disclaimer: The views in this article are personal and intended only for educational purposes. This is not financial advice or a product recommendation.
