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      The evolving U.S. tariff regime has introduced significant shifts in global trade dynamics, with direct implications for India’s export landscape. Following the announcement of a national economic emergency on 2 April 2025, the U.S. initiated reciprocal tariffs to address its widening trade deficit. A diplomatic pause was introduced to facilitate negotiations, later extended through July, with revised tariffs implemented from 1 August 2025.

      These developments are expected to reshape supply chains, particularly in sectors where India holds strategic relevance. In this evolving landscape, Section 232 tariffs have had a notable impact on sectors the copper, steel, aluminium, and automobile, influencing pricing and competitiveness. India now faces increased sensitivity to external trade headwinds, prompting a reassessment of trade strategy and sectoral resilience.

      Key highlights of the report include:

      • Tariff escalation on India

        The U.S. imposed a 25 per cent tariff along with an additional 25 per cent levy on India, citing Russian oil imports

      • GDP and investment impact

        Higher tariffs may lead to potentially reduced trade, cautious hiring and subdued investor sentiment

      • Key trade considerations and negotiation challenges

        India maintains restrictions on U.S. agricultural and dairy imports, while seeking lower tariffs on labour-intensive goods

      • MSME export vulnerability

        With over 45 per cent contribution to exports, MSME clusters are encountering increased exposure due to limited customer diversification and fragile supply chains

      • Implications on Indian sectors

        Over 30 per cent of India’s exports in textiles, pharmaceuticals, smartphones, gems and marine products are directed to the U.S., making them more vulnerable to tariff shifts

      • Challenges to textile competitiveness

        India’s textile exports could encounter increased competition as other nations gain ground in the U.S. market due to lower tariffs and cost advantages

      • Jewellery export constraints

        India supplies 45 per cent of U.S. diamond imports and revised tariffs could impact MSME-dominated polishing units already facing downward pricing adjustments

      • Marine trade headwinds

        India ranks third in U.S. imports of marine products and tariffs could affect price competitiveness and strain farming communities reliant on shrimp exports

      • Pharmaceutical risk exposure

        India supplies 40 per cent of U.S. generics and potential tariffs could disrupt pricing structures due to thin margins and regulations

      • U.S. bilateral trade landscape post-tariff announcements

        During the 90-day pause and its subsequent extension, several countries have finalised trade deals with the U.S.

      To address immediate tariff-related challenges, India could expedite trade negotiations with the U.S. to secure product-level exemptions for critical sectors. In parallel, targeted financial interventions such as subsidies, working capital support and export insurance could safeguard MSMEs and employment-intensive clusters, ensuring short-term stability and long-term competitiveness.

      For sustained trade resilience, India could advance strategic dialogues with viable partners to unlock market opportunities in high-growth sectors. A diversified export approach would further support a balanced and robust trade ecosystem. These efforts can be reinforced through deeper bilateral collaboration and enhanced industrial capabilities via technology partnerships. A shift towards premium products and services may also elevate India’s global competitiveness. Together, these measures can help mitigate the effect of elevated tariffs and reinforce India’s position in global trade.

      U.S. tariff shifts: Tariff revisions and their impact on India

      Shifting U.S. tariffs are prompting India to recalibrate its global trade strategy and competitive positioning

      Download the report (1.02 MB)
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      Key Contact

      Neeraj Bansal
      Neeraj Bansal

      Partner and Head India Global

      KPMG in India

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