On April 2, US President Donald Trump, in his “Liberation Day” speech, announced a 26% tariff on all imports from India, citing the need to address trade imbalances and non-reciprocal practices.
The new tariff, effective from April 9, will apply to all Indian goods entering the US, raising concerns among Indian exporters and industry leaders.
“My fellow Americans, this is Liberation Day, waiting for a long time. April 2nd, 2025, will forever be remembered as the day American industry was reborn, the day America’s destiny was reclaimed, and the day that we began to Make America Wealthy Again,” the US President said in his address.
Impact on Key Indian Export Sectors
The imposed tariff directly targets major Indian export sectors, including electronics, gems and jewellery, and select aluminium and auto parts.
The increased costs are expected to slow down trade between both nations, creating uncertainty for Indian businesses reliant on the US market.
Gems & Jewellery Industry Faces Further Struggles
Paresh Parekh, Partner and Retail Tax Leader at EY India, highlighted the severe impact on the gems and jewellery sector, which is already under pressure due to evolving consumer preferences, lab-grown diamonds, demonetization effects, and rising gold prices.
“The US tariff developments now create an additional adverse impact on the Gems and Jewellery sector, with real risk of job losses and margin erosion,” said Parekh.
India exports nearly $11.5 billion worth of gems and jewellery to the US annually, which constitutes 13% of the sector’s total exports and over 30% of its international shipments. The new tariffs could significantly disrupt this trade flow.
Currently, India imposes a 20% import tariff on gold jewellery, while the US levies only 5%. Additionally, cut and polished diamonds faced no US import tariff earlier, whereas India charges 5%, Parekh said.
Impact on India’s Apparel Exports & Manufacturing
Rajeev Gupta, Joint Managing Director of RSWM Ltd., the flagship company of LNJ Bhilwara group noted, “The recently announced 26% reciprocal tariff by the U.S. on Indian imports presents both challenges and opportunities for the Indian textile industry. The U.S. remains India’s largest textile export destination, accounting for nearly 28% of our total textile exports in 2023-24. While the tariff will increase costs for Indian exporters, our relative advantage over competitors like China (34%), Vietnam (46%), and Bangladesh (37%) could create new market opportunities.”
Ankit Jaipuria, Co-Founder of B2B apparel manufacturing firm ZYOD, also sees the tariff as both a challenge and an opportunity for India’s apparel sector.
“The U.S. tariffs, with India’s 26% rate being the lowest among Asian exporters, create a significant scenario for India’s apparel sector. In the near term, U.S. demand may soften as brands work through existing inventories and adopt a ‘wait-and-watch’ approach amid policy uncertainty,” said Jaipuria.
“However, given the labor-intensive nature of garment manufacturing, Asia will likely retain its dominance as the most cost-efficient production hub in the long run. India is relatively better positioned than peers due to its tariff differential,” he added.
Other Asian exporters will face higher tariffs than India: 34% on China, 20% on the EU, 24% on Japan, and 17% on Israel.
The PLI (Production Linked Incentive) scheme gains even more significance here, boosting supply-side competitiveness through economies of scale and cost-effective manufacturing will be key to converting this advantage into sustained export growth, according to Jaipuria.
EU Free Trade Agreement: A New Opportunity?
As India deals with US tariffs, a Free Trade Agreement (FTA) with the European Union is seen as an important way to expand trade opportunities.
“Meanwhile, the potential EU FTA adds another dimension. As the EU explores India’s growing consumer market and India seeks to diversify trade avenues, a ratified agreement could further strengthen India’s position as a dual-purpose hub—serving both as an export base and a consumption-driven market. The convergence of tariff recalibration, domestic policy push (PLI), and strategic trade alliances (EU FTA) could redefine India’s role in global apparel trade,” Jaipuria stated.
How Indian Businesses Can Adapt
Rajeev Gupta emphasised the need for manufacturers to adapt in response to the new tariffs. He said, “As this tariff shift takes effect, manufacturers must focus on increasing efficiency, optimising supply chains, and enhancing value addition to maintain competitiveness. With strategic adaptation, India’s textile sector can leverage its cost advantages, integrated production ecosystem, and focus on high-value offerings to maintain a strong foothold in the U.S. market despite evolving trade policies.”
