By Aditya Kumar Shukla & Ranjan Kumar
President Donald Trump’s announcement on 2 April 2025, of a sweeping 26 percent tariff on all imports from India, has sent shockwaves through Indian as well as global markets and in diplomatic circles. Rooted in Trump’s ‘America First’ agenda, the move aims to correct what he calls ‘unfair trade practices’ and tilt the economic and geostrategic balance in America’s favour. While the news has triggered unease in Indian business circles, New Delhi’s response has been calm and calculated, signalling strategy over panic.
Indian ministry of commerce and industry officials have publicly characterised the move as a ‘mixed bag’ rather than a diplomatic fallout. Sources cited in Indian media suggest it is more of an American pressure tactic than a rupture in ties – especially with bilateral trade negotiations gaining traction. The hope is that addressing US concerns could pave the way for easing or eliminating the tariffs by the time a trade deal is signed, possibly by the end of 2025. The effect of the tariffs would not be uniform across industries. Some sectors are bracing for major disruption, while others may escape unscathed – or even benefit from the shifting trade dynamics.
One sector breathing a sigh of relief is pharmaceuticals. Exempted from the tariff hike, India’s pharmaceutical exports, valued at around US$9 billion annually, play a vital role in the US healthcare ecosystem. India’s status as the top global supplier of generic medicines may well have played a role in this exemption. Textiles and the clothing industry, on the other hand, are poised for a significant fallout. The new 26 percent levy could render Indian garments uncompetitive in the price-sensitive American market. The Indian garment industry plays a major role in employment, reportedly engaging around 16.45 percent of the country’s entire manufacturing workforce. With ample alternatives available, industry bodies such as the Apparel Export Promotion Council have called for urgent government support to cushion the blow to exporters.
The electronics sector paints a more complex picture. While Indian electronic products are subject to the tariffs, competitors like China and Vietnam face even steeper ones. This presents an opening for Indian manufacturers, particularly in high-growth areas such as smartphones, semiconductors and consumer electronics, provided Indian manufacturers can scale quickly and maintain world-class quality.
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Agriculture is another affected area, with staples such as rice, spices and seafood on the tariff list. Yet, thanks to even higher tariffs on exports from countries like China and Brazil, Indian goods may retain a competitive edge, especially in niche or premium categories such as basmati rice and organic produce.
From a broader economic view, many experts see this tariff imposition as an important moment for India’s domestic policy. Analysts writing for Mint and The Hindu Business Line argue that the country should double down on structural reforms, bolster its manufacturing base and aggressively pursue schemes such as the Production-Linked Incentive (PLI).
In a post-pandemic world with reconfiguring global supply chains and rising geopolitical tensions, India has a unique opportunity to establish itself as a stable, scalable manufacturing hub. Still, risks abound. Advisory firms such as Deloitte warn that low-margin sectors – for example, textiles and low-end electronics – may be unable to absorb the added costs. Potential consequences include cancelled orders, job losses and a slowdown in export momentum. On the US side, increased prices could drive up consumer inflation, depress demand and strain bilateral trade further.
For Trump, it seems that this tariff decision aligns neatly with his 2026 midterm election strategy. By taking a tough stance on trade with nations such as India, China, and Mexico, he appeals to voters worried about job losses and industrial decline. Indian experts caution, however, that while such moves may win political points domestically, they risk undermining long-term global trade stability.
In this case, India has chosen diplomacy over confrontation. The ministry of external affairs has reaffirmed its commitment to the US relationship and called for constructive dialogue. Although retaliatory steps are reportedly under consideration, New Delhi seems intent on avoiding unnecessary escalation. Past disputes, such as those involving Harley-Davidson motorcycles or Californian almonds, offer precedents for limited yet symbolic retaliation, should it come to that.
It is an established fact that disruption always creates some opportunities. With the US slapping even harsher tariffs on Chinese imports, American buyers may turn to India to plug supply chain gaps. If Indian manufacturers can meet global quality and delivery standards, they stand to gain across sectors, from electronics and auto components to food processing and clean energy.
Aditya Kumar Shukla and Ranjan Kumar are with the Amity School of Communication, Amity University Madhya Pradesh, Gwalior, India.
[This is an excerpt from an article in The Round Table: The Commonwealth Journal of International Affairs and Policy Studies.]
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