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Informist, Tuesday, Aug. 12, 2025

 

MUMBAI – Imposition of the 25% tariff on import of goods from India by the US will have a significant impact on earnings of companies in sectors such as diamond polishing, shrimp, and home textiles and carpets, Crisil Ratings said in a report Tuesday. Moreover, the announcement of an additional 25% tariff on India, as a penalty for importing crude oil from Russia, will make Indian exports to the US unviable for the aforesaid sectors as well as sectors like ready-made garments, chemicals, agrochemicals, capital goods, and solar panel manufacturing, according to the report.

 

"The extent of impact will vary depending on exposure, ability to pass on incremental costs to customers, and relative tariff disadvantage versus competing nations," Crisil said. The US accounted for around 20% of India's merchandise exports in 2024-25 (Apr-Mar) and around 2% of its overall GDP.

 

In FY25, exports to the US accounted for around 25% of total revenue of diamond polishers. "The reciprocal tariff, along with the already tepid demand for natural diamonds in the US and growing demand for lab-grown diamonds will lead to a sharp dip in revenue," Crisil said. The tariff will also put pressure on the already modest operating margin of the sector due to reduced fixed-cost coverage and the onus to bear the higher tariff cost, as retailers in the US have shown limited inclination to take on the burden, the report said.

 

For shrimp exporters, the US accounts for around 48% of their revenue. India is now of the highest-taxed major shrimp exporter to the US with the reciprocal tariffs, countervailing duty, and anti-dumping duties in place, Crisil said. This could drag down the volume of exports, even if players for alternative markets to support their exports. "Also, the sector operates on thin operating margin which will be further eroded by the imposition of tariff due to the added cost burden and limited pass-through ability due to stiff competition from Ecuador, which benefits from lower tariffs."

 

Home textiles and carpets are both major export-oriented sectors with exports accounting for 70-75% and 65-70% of total revenue for these sectors, respectively. The US accounts for around 60% of exports of home-textiles and around 50% of exports for carpets, as per Crisil. The reciprocal tariff will lead to a material decline in revenue and profit for both these sectors, especially given the limited ability to pass on the higher cost due to the discretionary nature of the products.

 

Crisil said the impact of the reciprocal tariff is likely to be more manageable for other sectors such as ready-made garments, agrochemicals, specialty chemicals, and capital goods. This is because of moderate exposure of these sectors to the US and limited tariff disadvantage that will allow companies to partly pass on the impact to customers.

 

However, the additional 25% tariff will have an adverse impact on all these sectors. For the ready-made garment sector, "exports to the US form 10-15% of total revenue and will become completely unviable as the tariff structure will be significantly higher than that of competing manufacturers in China and Vietnam," Crisil said.

 

Agrochemical exports to the US account for 11-12% of the sector's revenue, the specialty chemical exports account for around 5% of the total revenue of the sector, and for capital goods manufacturers, the revenue exposure to the US is around 15%. "For India's solar panel manufacturing industry, volume growth and operating profitability are unlikely to be significantly impacted, as exports to the US account for only 10-12% of overall sales volume," Crisil said, adding that this share is expected to decline in FY26 due to growing domestic demand.

 

Additionally, the imposition of tariffs on several countries risks competing nations redirecting their sales to other countries including India, which could negatively impact the earnings of domestic steel, chemicals, and agrochemical companies, until there is a global demand and supply rebalance.  End

 

Reported by Ashutosh Pati

Edited by Ashish Shirke

 

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