Tariff to hit merchandise, agri exports to U.S.; trade calls for early conclusion of BTA between India and U.S.

Indian exporters seek bilateral trade agreement with U.S. to mitigate impact of 26% tariffs on key sectors.

In the wake of the U.S. announcing 26% tariff on its Indian imports, exporters in India have called for early conclusion of bilateral trade agreement (BTA) with the U.S.

“Assessing the impact of the recently imposed 26% reciprocal tariffs by the United States on Indian exports reveals a nuanced scenario. While these tariffs do present challenges, India’s position remains comparatively favourable. For instance, Vietnam faces a 46% tariff, China 34%, and Indonesia 32%, placing India in a relatively better position than key competitors such as Vietnam, China, Indonesia, Bangladesh, Sri Lanka, and Myanmar. Despite the tariffs, certain sectors in India, including apparel, gems and jewellery, leather, electronics, chemicals, plastics, and furniture, may experience a diversion of exports, potentially offsetting some adverse effects. The timely conclusion of a Bilateral Trade Agreement (BTA) between India and the U.S. is crucial to mitigate these tariffs and provide relief to Indian exporters,” said Ajay Sahai, director general and chief executive officer of Federation of Indian Exporters Organisation (FIEO).

The executive director of EEPC India Adhip Mitra said, engineering exports to the U.S. — valued at $17 billion in FY 24 — is likely to decline to $11.3 billion to $12.8 billion because of the 27% tariff. Indian export of steel and steel products, aluminium and products, auto components, electrical machinery and equipment and industrial machinery will be the worst hit. India should accelerate its efforts for trade agreements with the EU, UK, Canada and the GCC. Strategic intervention will give relief to exporters, he added.

According to Siddhartha Rajagopal, executive director of the Cotton Textiles Export Promotion Council, supply of garments and textiles to the U.S. from Asia will take a hit with the tariffs announced by the US. The fulcrum of production is likely to shift to south America, parts of Europe and Turkey in the short term. Labour-intensive Indian industries such as garments and home textiles should get a good deal in the proposed bilateral trade agreement between India and the US, he noted.

Rice exporters are of the view that the trade will be able to manage the tariff as most of the rice consumers in the U.S. are Indian diaspora and rice is an essential commodity.