CFP
AsianFin — The Trump administration's new "reciprocal tariffs" policy has dramatically increased U.S. duties on Indian imports, pushing the average tariff rate from 2% to 26%. The move has triggered alarm in India, with businesses scrambling to mitigate rising costs.
Despite Indian Prime Minister Narendra Modi's diplomatic efforts early in Trump's second term—including a high-profile visit to the U.S.—the tariff hikes proceeded unchecked. Analysts warn the policy could deal a heavy blow to Indian exporters, though New Delhi maintains that its own tariffs remain comparatively lower than those of other nations, offering a potential competitive edge.
India's "Make in India" initiative, which has gained traction under the Biden administration's "friendshoring" strategy, now faces uncertainty. The policy, which redirects supply chains to allied nations, had spurred significant investments in India's electronics sector.
In December 2024, India's electronics exports surged 35.1% year-on-year to $3.58 billion, making them the country's third-largest export category after engineering and petroleum goods. The sector has also become a critical manufacturing hub for Apple, which currently assembles 10-15% of its iPhones in India. However, the new tariffs jeopardize Apple's plans to expand production to 25% by 2025.
In a race to avoid the tariffs, Apple reportedly delivered five flight cargos of iPhones from India to the U.S. between March 27 and 29. The additional 26% duty could raise the cost of Indian-made iPhones by up to 34%, which translates to $120 to $420 per device. Supply chain sources say any delay beyond April 5 could have cost Apple $8 million daily in U.S. sales.
The tariffs have also triggered a last-minute export rush in other sectors. Between April 1 and 4, Indian gem and jewelry shipments to the U.S. spiked as businesses raced to beat the deadline. The U.S. accounts for 30.4% of India's annual jewelry exports, making the new duties a major concern.
In Surat, Gujarat—the global diamond-processing capital—industry leaders fear the tariffs will inflate prices and slash demand. The sector, which employs around 700,000 workers, now faces heightened job risks.
Modi's February visit to the White House, shortly after Trump signed the initial tariff order, was seen as a last-ditch effort to secure relief. Despite cultivating close ties with Trump during his first term, Modi's appeals fell short.
India's Commerce Ministry has since said it is assessing the tariffs' impact and exploring options for a bilateral trade deal. The announcement followed a critical U.S. Trade Representative report accusing India of trade barriers in agriculture, intellectual property, and digital services.
Experts note that Trump has historically been unmoved by diplomatic pressure, often escalating trade disputes when challenged.
The tariffs also threaten Bangladesh, South Asia's second-largest U.S. exporter. Its $7.5 billion garment industry faces a 37% duty—higher than India's—potentially crippling a key economic driver.
As tensions escalate, the new tariffs could reshape South Asia's export landscape, leaving businesses and governments grappling with economic and diplomatic challenges.
