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Informist, Friday, Aug. 22, 2025

MUMBAI – In S&P Global Ratings's view, the US' move to double tariffs on Indian goods--from 25% to 50%--in retaliation for New Delhi's oil trade with Moscow will not be uniform and expects this to impact 50-60% of India's total exports to the US. The additional 25% tariff will come into effect on Wednesday. "A US tariff hike to 50% would hit Indian corporates unevenly. Capital goods, chemicals, automobiles, and food and beverage exports would face the toughest adjustment," analysts at S&P Global Ratings in a report Friday.

 

Sectors such as textiles and gems and jewelry may only see a moderate disruption in trade but their slim profitability leave them vulnerable to even small tariff increases, they said. Pharmaceuticals, smartphones, oil and gas, and steel are relatively insulated because of exemptions, existing tariffs and strong domestic demand, they added.

 

Industries such as automobiles, chemicals, and capital goods will struggle the most, given their dependence on US markets and entrenched supply chains, S&P Global said. For India, US is the largest export destination for capital goods with an 18% share but its share in total US imports is less than 2%, making the country "easily replaceable", the report said. Capital goods exporters may face a $12.4 billion hit due to the 50% tariffs imposed by the US. Higher tariffs could shift market share to competing nations such as Vietnam, Thailand, and Malaysia, which benefit from lower tariffs. Indian exporters would struggle to redirect products as the US accounts for nearly 20% of their total exports. The next big markets that domestic exporters can consider are the United Arab Emirates and Singapore but they only make for 8% and 6%, respectively, of India's total exports, S&P Global said.

 

Domestic exporters shipping automobile, chemicals, and food beverages to North America will also find themselves in a tight spot as it is the top destination for all the three sectors. Exporters shipping chemical products will face a $6.5 billion hit due to the tariffs, while food and beverages exporters will have a $5.7 billion impact. However, automobile exports will have a slightly lesser impact at $2.6 billion. "Each accounts for more than 10% of India's total exports in their respective segments," the rating agency said. In contrast, India's share of US imports is small that is less than 1% for automobile, 2-3% for chemicals and food and beverages, making them easy to substitute. As in the case of capital goods, rerouting these products to other markets is a big challenge exporters would face.

 

In case of textile exports, India is the third-largest exporter to the US after China and Vietnam, with a 9% market share currently, the report said. India's growth in market share was driven by US strategy to decrease reliance on China for importing goods. Over the past five years, India has gained market share in the US at the expense of China, growing from 6% to 9%, while that of China consequently falling to 25% from 38%, the report said. Bangladesh which currently has a 6% market share in US' textile imports stands at advantage due to lower tariffs. 

 

Gems and Jewellery exporters will have a rather moderate impact from the double import duties with India being the second-largest exporter to the US, holding a 13% market share. A large portion of these exports are cut and polished diamonds. India's dominant position in polished diamonds--handling nine out of 10 diamonds processed globally--makes it difficult to replace, the report said. Rerouting trade to other countries will offset the impact of US tariffs.   

 

Currently, products of pharmaceuticals, smartphones, and energy sectors do not attract any tariffs from the US. "They account for 25% of India's total exports to the US and would remain unaffected," the rating agency said. "India has gained from global companies diversifying away from China; Apple's iPhones production in India drove a tenfold rise in smartphone exports over the past three years." In case of steel, robust domestic steel demand, which S&P Global expects to grow at 8% over the next three years, will negate the lower steel exports to the US. The US makes about only 3% of India's total steel exports, and the US administration has already imposed a blanket 50% tariff on steel imports.  End 

 

Reported by Gopika Balasubramanium

Edited by Akul Nishant Akhoury

 

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