Indian exporters could face a significant blow to their competitiveness in the United States market as rising tariff barriers threaten to make exports economically unviable, according to a recent analysis by Crisil Ratings. The report warns that multiple industries, from engineering goods and textiles to chemicals and metals, may experience margin pressures and potential market share losses if these trade restrictions persist.
The Tariff Challenge – A Rising Concern for India Inc
The US has been one of India’s largest export destinations, contributing a major share to sectors like textiles, engineering goods, pharma, gems and jewellery, chemicals, and IT services. However, the tightening trade stance, particularly in sectors sensitive to domestic US manufacturing jobs, is creating a cost disadvantage for Indian exporters.
Crisil Ratings’ assessment highlights that higher import duties and non-tariff barriers are eroding the price advantage Indian companies have historically enjoyed. This trend, combined with the strengthening US dollar, has created a double impact: rising landed costs for US buyers and shrinking margins for Indian sellers.
Industry-Wise Impact Assessment
| Industry Segment | US Market Share for India | Estimated Tariff Impact | Risk Level |
|---|---|---|---|
| Textiles & Apparel | ~27% of exports | High (up to 25% duties) | Very High |
| Engineering Goods | ~20% of exports | Medium-High (10-15%) | High |
| Pharmaceuticals | ~18% of exports | Low (mostly exempt) | Low |
| Gems & Jewellery | ~16% of exports | Medium (5-10%) | Medium |
| Chemicals | ~12% of exports | Medium-High (8-12%) | High |
| Metals & Alloys | ~10% of exports | High (15-25%) | Very High |
Why the Tariffs Are Problematic for Indian Exporters
- Erosion of Cost Advantage – Indian goods, which have traditionally been more competitive due to lower production costs, are now facing a price disadvantage when tariffs are factored in.
- Shift in Sourcing Preferences – US buyers are exploring alternative markets like Vietnam, Bangladesh, and Mexico, which have favourable trade agreements with the US.
- Compliance Burdens – Non-tariff barriers such as stricter quality checks, environmental certifications, and origin verification add to exporters’ operational costs.
- Exchange Rate Volatility – A stronger dollar makes imports more expensive for US buyers, compounding the tariff impact.
Sectors at the Highest Risk
Crisil Ratings underlines that labour-intensive industries such as textiles, leather goods, and gems & jewellery will bear the brunt of these trade barriers. These sectors have thin margins and depend heavily on volume exports to the US. Any significant drop in orders could lead to production cuts and job losses in India.
For the engineering goods and metals sector, the challenge is more about competitiveness against countries with zero-tariff agreements. For example, Mexico’s participation in the USMCA (United States–Mexico–Canada Agreement) allows it to ship products to the US without import duties, giving it a clear edge over Indian suppliers.
India’s Export Exposure to the US – Key Statistics
| Year | India’s Exports to US (USD Billion) | Share of US in India’s Total Exports | YoY Growth |
|---|---|---|---|
| 2021 | 51.6 | 17% | +28% |
| 2022 | 75.1 | 18% | +45% |
| 2023 | 77.2 | 17% | +3% |
| 2024* | 68.5 (est.) | 15% | -11% |
*2024 figure is an estimate based on first half-year trade trends.
Possible Outcomes for India Inc
If tariffs remain elevated or expand to new product categories, Crisil warns of the following:
- Decline in Export Volumes – Particularly in non-essential goods categories.
- Margin Compression – Companies may absorb part of the tariff cost to retain buyers.
- Shift to Other Markets – Exporters may focus on Europe, Middle East, and ASEAN to offset US market losses.
- Production Realignment – Some firms might set up units in tariff-free countries to continue supplying to the US.
Government & Industry Response
India has been actively pursuing bilateral trade agreements to counter tariff disadvantages. The India-EU Free Trade Agreement (FTA) and potential India-UK FTA are seen as critical to offsetting the potential loss of US market access.
Industry bodies have also urged the government to:
- Negotiate tariff relief or sector-specific exemptions with the US.
- Provide export subsidies or tax rebates to affected sectors.
- Enhance logistics and port efficiency to reduce overall export costs.
Strategic Options for Exporters
Crisil’s report advises exporters to adopt a multi-pronged risk management strategy:
- Product Diversification – Target categories with lower or no tariff exposure.
- Geographical Diversification – Increase presence in non-US high-growth markets.
- Value-Added Offerings – Move up the value chain to justify higher prices despite tariffs.
- Joint Ventures Abroad – Leverage local manufacturing in tariff-friendly countries to bypass duties.
The Broader Trade Outlook
Global trade dynamics are undergoing a shift towards protectionism. The US tariffs on India form part of a wider pattern that includes trade frictions with China and the EU. With supply chain resilience and domestic job protection being top priorities for many governments, exporters worldwide face rising barriers.
For India, maintaining growth momentum in exports will require a blend of diplomacy, industry adaptation, and strategic innovation.
Historical Patterns – India’s Export Resilience Post-Tariffs
| Year | Trade Disruption | Sector Impacted | Recovery Time |
|---|---|---|---|
| 2018 | US Tariffs on Steel & Aluminium | Metals | 1-2 years |
| 2019 | GSP Withdrawal by US | Multiple Sectors | 1 year |
| 2024 | Tariff Expansion | Multi-sector | Ongoing |
Conclusion – A Crossroads for India’s US Export Story
The Crisil Ratings assessment makes it clear that rising US tariffs are not just a temporary hurdle but a structural challenge for India’s export strategy. If these trade barriers persist or intensify, India Inc may need to rethink its dependence on the US market and accelerate efforts to capture growth in other regions.
The coming months will be crucial as trade negotiations, global economic conditions, and geopolitical developments will shape the future of India-US trade relations. For now, the message is clear – without strategic adaptation, exporting to the US could become financially unviable for many Indian companies.
Disclaimer: This article is for informational purposes only and does not constitute financial, investment, or trade advice. Readers should consult official trade policy documents and industry experts for specific guidance.
