MUMBAI: Stating that the 25% tariff on Indian exports to the US from August 7 leaves the country at a relative disadvantage, a rating agency has warned that unless a bilateral trade agreement is swiftly concluded, the current tariff structure can significantly alter the export trajectory this fiscal and beyond. High sectoral dependence on US markets, coupled with tariff asymmetry, poses a serious challenge to India’s trade competitiveness, it added.
In a jolt to the bilateral trade dynamics, US president Donald Trump has imposed a 25% reciprocal tariff on Indian goods effective August 7. This tariff, accompanied by an additional unspecified penalty on India’s crude and defence imports from Russia, is significantly higher than tariffs on other Asian peers like Vietnam (20%), Indonesia (19%), and Japan (15%), placing it at a relative disadvantage.
In a sector-wise analysis of the impact of these tariff tantrums, domestic rating agency Icra said this will have a 20 bps impact on the FY26 growth — down from 6.2% to 6%.
Despite a robust trade surplus with the US, which rose to $41 billion in FY25 from $21 billion in FY15, India’s competitive edge could be eroded in the absence of a bilateral trade resolution, it warned.
The worst-hit sectors include textiles, auto components, tyres, chemicals, agrochemicals, and cut & polished diamonds. For instance, the US accounts for 27% of India’s auto component exports, and around 36% of cut & polished diamonds exports are directly routed to the US. Cut & polished diamonds also face indirect risks due to potential trans-shipment tariff enforcement on intermediaries like Dubai or Israel.
Tyre exports to the US (17% of total) and agrochemical exports (18%) are similarly exposed, as domestic firms now face tariff disadvantages relative to key regional competitors.
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