New Delhi, Aug 27: As the higher US tariffs against Indian goods set to come into effect from Wednesday (US time), sectors such as textiles and gems and jewellery — both labour-intensive industries — are expected to face moderate pressures while pharmaceuticals, smartphones and steel are relatively insulated due to exemptions, existing tariff structures and strong domestic consumption.

A new SBI Research report believes that the US tariffs are likely to affect the US GDP by 40-50 bps and higher input cost inflation.

“As $45 billion of export will be impacted due to 50 per cent tariffs, at worst scenario, India’s trade surplus will convert to trade deficit. However, we believe trade negotiations will restore confidence and improve export to US,” the report mentioned.

Amid higher tariffs, India’s products might lose competitiveness potentially benefitting countries like China and Vietnam, as tariff imposed on India is also higher than that on other Asian countries such as China (30 per cent), Vietnam (20 per cent), Indonesia (19 per cent) and Japan (15 per cent).

“The US remains India’s largest export destination for textiles. Over the past five years, India has steadily gained market share in textiles while China’s share has fallen significantly. This shift highlights India’s growing importance of India in US supply-chain arrangements,” the report mentioned.

The US remains the largest market for gems and jewellery sector, accounting for nearly a third of the sector’s $28.5 billion annual shipments. With US tariffs rising from 25 per cent to 50 per cent, exporters are bracing for significant disruption.

Shrimp exporters, who send more than half their output to the US, fear steep losses and order cancellations as the higher tariff comes into effect. This also impact the prices for US consumers and making India less competitive against rivals like Ecuador.

The US has exempted pharmaceuticals imports from India. India’s share in US’s total pharma imports is 6 per cent (in 2024) and 40 per cent of India’s pharma exports goes to the US (FY25).

Meanwhile, the US is beginning to show signs of renewed inflationary pressure, driven by the pass-through effects of recent tariffs and a weaker dollar — particularly in import-sensitive sectors such as electronics, autos, and consumer durables.

The US inflation is expected to stay above the 2 per cent target through 2026, driven by supply-side effects of tariffs and exchange rate movements.

(IANS)

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