Which sectors are worst hit by tariffs?

Basics of the Tariffs

• Effective date: August 27, 2025.
• Tariff level: Flat 50% additional tariff on imports from India (over existing tariffs).
• Coverage: Broad, covering labour-intensive and manufacturing sectors where U.S. is a major export destination.
• Earlier tariff structure: Most sectors faced 0–10% tariffs; now in many cases, effective duties are 50–60%.
• Metrics of severity (impact analysis):
  • Export value to U.S. (absolute terms).
  • Share of U.S. in India’s total exports of that product.
  • Final tariff rate post-hike.

Relevance : GS 3(Economy – Tariff)

Sectors Facing Severe Impact

(a) Shrimp

• Exports to U.S.: $2.4 billion (2024–25).
• Share: 32.4% of India’s total shrimp exports.
• Tariff jump: 10% → 60%.
• Immediate impact:
  • Sharp fall in demand from U.S. buyers.
  • Reports of exporters in Andhra Pradesh lowering purchase prices.
  • Cancelled contracts and shipment delays.
  • High risk for aquaculture farmers and coastal labour.

(b) Textiles & Apparel (Tiruppur cluster etc.)

• Exports to U.S.: $2.7 billion.
• Share: 13.2% of India’s total textile exports.
• Tariff jump: 4% → 54%.
• Immediate impact:
  • Exporters rushing existing shipments before duties bite.
  • U.S. buyers cancelling fresh orders.
  • Threat to jobs in Tiruppur, Surat, Panipat (labour-intensive hubs).

(c) Jewellery, Diamonds & Carpets

• U.S. a top market for India’s gems & jewellery (~$10–12 billion annually, though not all under 50% tariff).
• Impact:
  • High-value exports like cut diamonds and studded jewellery hit severely.
  • Surat, Jaipur clusters face job & liquidity pressures.
  • Reports of production cuts and downsizing.

Sectors Facing Moderate Impact

(a) Metals (Steel, Aluminium, Copper)

• Exports to U.S.: $4.7 billion (17% of total Indian metal exports).
• Impact:
  • U.S. not largest global market, but vital for SMEs in Delhi-NCR engineering belt and eastern foundry hubs.
  • Stainless steel, aluminium casting, and copper semi-finished goods face job disruptions.

(b) Machinery & Mechanical Appliances

• Exports to U.S.: $6.7 billion (20% of India’s total in this category).
• Impact:
  • Demand drop expected, but diversified global buyers soften the blow.
  • Still critical for SMEs dependent on U.S. orders.

(c) Organic Chemicals

• Medium exposure to U.S.
• Tariff impact is cushioned by wider markets in EU, Japan, ASEAN.
• Industry body CHEMEXCIL has sought government intervention.

Immediate Economic Impact

• Severe demand shock: shrimp, textiles, jewellery already seeing cancellations.
• Price crash: Shrimp prices falling in Andhra Pradesh procurement markets.
• Employment risk: Labour-intensive sectors (textiles, gems, aquaculture) at risk of layoffs.
• Exporters’ reaction: Pre-shipment rush, appeals to government, lobbying through industry bodies.

Government Response (Short-term)

• “Swadeshi” & “Vocal for Local” narrative: Reduce export dependency; boost domestic demand.
• Multi-ministry plan under consideration (Commerce, Finance, External Affairs, MSME):
  • Possible interest subvention / credit support for exporters.
  • Export incentive packages for worst-hit sectors.
  • Marketing support to explore alternative destinations.
• RBI readiness: Governor stated RBI will provide liquidity or credit easing to impacted sectors.

Medium to Long-term Strategy

• Diversification of export markets:
  • Leverage FTAs (UAE, Australia, EU in progress).
  • Push into Africa, ASEAN, Latin America.
• Strengthening domestic value chains: Reduce reliance on U.S. orders.
• Special packages/funds: For sectors with high labour absorption (textiles, gems, marine exports).
• Negotiation channels: Possible WTO consultations or bilateral trade talks with U.S.

International Parallels

• Similar protective tariffs by U.S. in past (e.g., Trump-era steel tariffs, China tariffs) caused:
  • Short-term export pain.
  • Trade diversion to alternate markets.
• Other countries responded with compensation packages for farmers/exporters or by negotiating bilateral deals.

Summary

• High-impact sectors: Shrimp, textiles, jewellery/carpets (tariffs up to 60%, immediate order cancellations, production/job cuts).
• Moderate-impact sectors: Metals, machinery, organic chemicals (tariffs 50%, but diversified export base reduces damage).
• Government response: Short-term relief plan + credit support + long-term diversification strategy.
• Outlook: Immediate pain in labour-heavy sectors, with medium-term adjustment possible if markets diversify and domestic demand strengthens.