How Can India Counteract US Tariffs to Boost Exports?
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Synopsis
In light of the recent US tariffs impacting MSMEs, India is presented with a unique opportunity to expand exports to alternative markets and fully utilize the benefits from the UK trade agreement. This article delves into strategies that could strengthen India's export landscape amidst challenging tariff conditions.
Key Takeaways
- India's MSMEs are crucial, representing 45% of total exports.
- New US tariffs could raise total tariffs to 50% on Indian goods.
- Leveraging the UK trade deal can enhance MSME competitiveness.
- Textiles, gems, and seafood sectors will feel the most impact.
- Pharmaceuticals remain unaffected by current tariffs.
New Delhi, Aug 20 (NationPress) In response to the US tariffs that impact Micro, Small and Medium Enterprises (MSMEs), India has the opportunity to boost exports to other nations while also capitalizing on the advantages of the recently finalized trade agreement with the UK and a prospective accord with the European Union (EU), as highlighted in a report released on Wednesday.
The higher tariffs imposed by the US will significantly affect MSMEs, which represent nearly 45 percent of India's overall exports, according to findings from Crisil Intelligence.
Currently, the US enforces a 25 percent tariff on Indian goods, and an additional 25 percent tariff is set to take effect from August 27, bringing the total tariff on Indian products to a staggering 50 percent.
The likely implementation of this additional ad valorem tariff will considerably impact specific sectors, warranting close observation, noted the report.
According to Elizabeth Master, Associate Director at Crisil Intelligence, "The India-UK free trade agreement is beneficial for MSMEs in export-driven sectors such as textiles, gems and jewellery, seafood, leather, and pharmaceuticals."
While these sectors make up less than 3 percent of imports to the UK, excluding ready-made garments (RMG) at 6 percent, the trade deal is poised to enhance the competitiveness of MSMEs against countries like Bangladesh, Cambodia, and Turkey, while also providing an advantage over China and Vietnam in RMG, Master added.
The textiles, gems and jewellery, and seafood industries, which comprise 25 percent of India's exports to the US, are expected to bear the brunt of these tariffs. MSMEs hold over 70 percent of market share in these areas, with chemicals being another sector likely to face challenges, where MSMEs account for 40 percent of the market.
As per Pushan Sharma, Director at Crisil Intelligence, the partial absorption of increased product prices due to the elevated tariffs will add pressure on MSMEs, further tightening their already narrow profit margins, presenting a substantial challenge to their competitive position.
In the gems and jewellery sector, MSMEs in Surat, which control more than 80 percent of diamond exports, will experience significant tariff impacts.
The auto components sector is predicted to face a relatively minor adverse effect since the US constitutes only 3.5 percent of India's total production.
Conversely, certain sectors are currently unaffected. For instance, pharmaceutical products, which represent 12 percent of exports to the US, are presently exempt from tariffs.
In the steel industry, the impact of US tariffs is anticipated to be minimal for MSMEs, as they primarily engage in re-rolling and producing long products, while the US mainly imports flat products from India. Additionally, the US contributes to only 1 percent of India's steel exports, as noted in the report.
Point of View
The challenges posed by US tariffs on Indian MSMEs highlight a crucial moment for India to pivot its export strategies. The potential to engage more vigorously with other international markets and capitalize on trade agreements signifies a proactive approach to sustaining economic growth. As India's economy adapts, it must maintain a focus on enhancing competitiveness and resilience.
NationPress
08/10/2025
Frequently Asked Questions
What are the current US tariffs on Indian goods?
The US currently imposes a **25 percent tariff** on Indian goods, with an additional **25 percent tariff** set to take effect from **August 27**, totaling **50 percent**.
Which sectors are most affected by these tariffs?
The sectors most impacted include **textiles**, **gems and jewellery**, **seafood**, and **chemicals**, with **MSMEs** holding a significant market share in these industries.
What opportunities does the UK trade deal provide?
The **India-UK free trade agreement** is expected to enhance the competitiveness of **MSMEs** in export-oriented sectors such as **textiles**, **gems**, and **pharmaceuticals**, providing an edge against competitors like **Bangladesh** and **Turkey**.
How will these tariffs affect the pharmaceutical sector?
Currently, **pharmaceutical products**, which account for **12 percent** of exports to the US, are exempt from tariffs, suggesting limited immediate impact on that sector.
What is the overall impact of US tariffs on India's economy?
The tariffs pose a significant challenge to India's **MSMEs**, which represent **45 percent** of total exports, potentially squeezing their profit margins and affecting their competitive stance.
