Assessing the Impact of 2025 Reciprocal Tariffs on India–US Export Trade

Journal of Research and Development Peer Reviewed International, Open Access Journal. ISSN : 2230-9578 | Website: https://jrdrvb.org Volume-17, Issue-9(I) | Sept - 2025 107 Assessing the Impact of 2025 Reciprocal Tariffs on India–US Export Trade Dr. Mangesh D. Jadhav Assistant Professor, Dept. of Commerce Shivaji Arts, Commerce & Science College Kannad. Manuscript ID: JRD -2025(I)-170925 ISSN: 2230-9578 Volume 17 Issue 9(I)| Pp. 107-110 Sept. 2025 Submitted: 9 Aug. 2025 Revised: 20 Aug. 2025 Accepted: 20 Sept. 2025 Published: 30 Sept. 2025 Abstract. – The 2025 imposition of reciprocal tariffs by the United States marks a significant shift in global trade dynamics, directly impacting India's export relationship with its key trading partner. Under Executive Order 14257, India now faces a 26% reciprocal tariff rate on a broad range of goods exported to the U.S., affecting over $80 billion in annual trade. This study evaluates the sector-wise impact of these tariffs, focusing on high-value and price-sensitive categories such as engineering goods, electronics, textiles, and gems & jewelry, which collectively represent more than 60% of India’s U.S.-bound exports. The paper examines India's strategic response, including tariff negotiations, market diversification, and domestic policy recalibration. Overall, this analysis provides a timely assessment of how reciprocal trade policy could reshape the structure, competitiveness, and sustainability of India’s export economy. KeywordsReciprocal, Tariffs, Export, fair Trade practices and Import. Introduction Reciprocal tariffs occur when one country imposes a tax on imports from another country in response to that country doing the same. For instance, if Country A places a 15% tariff on steel from Country B, then Country B might retaliate by imposing a similar tax on cars from Country A. The underlying idea is to promote fairness either by protecting domestic industries or by pressuring the other country to lower its trade barriers. These tariffs are often used as a negotiating tool. However, if both countries continue to escalate the situation by imposing more tariffs, it can lead to a trade war, as seen in the recent conflict between the U.S. and China. On the other hand, if both parties are willing to compromise, such disputes can lead to dialogue and eventual tariff reductions. 2. Objectives of the study: 1. To know the concept of Reciprocal Tariffs. 2. To Evaluate Sector Specific impacts of reciprocal Tariffs. 3. To Analyze the Change in Export Volume and Value. 3. Research methodology: The study based on secondary information/data. Different journals, newspapers, relevant websites have been consulted in order to make the study an effective one. The present study is an attempt to examine the Impacts of Reciprocal Tariffs 2025 on India. 4. Concept of Reciprocal Tariffs A reciprocal tariff refers to a trade policy in which two countries agree to grant each other the same or similar tariff rates on imports and exports. Quick Response Code: Website: https://jrdrvb.org/ DOI: 10.5281/zenodo.16885235 Creative Commons (CC BY-NC-SA 4.0) This is an open access journal, and articles are distributed under the terms of the Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International Public License, which allows others to remix, tweak, and build upon the work noncommercially, as long as appropriate credit is given and the new creations ae licensed under the idential terms. Address for correspondence: Dr. Mangesh D. Jadhav, Assistant Professor, Dept. of Commerce,Shivaji Arts, Commerce & Science College Kannad How to cite this article: M.D. Jadhav.(2025). Assessing the Impact of 2025 Reciprocal Tariffs on India–US Export Trade. Journal of Research & Development, 17(9(I)),107-110 Original Article Journal of Research and Development Peer Reviewed International, Open Access Journal. ISSN : 2230-9578 | Website: https://jrdrvb.org Volume-17, Issue-9(I) | Sept - 2025 108 In simple terms, it's a mutual arrangement where each country reduces tariffs (taxes on imports) for the other, aiming to promote fair and balanced trade. 5. Impact of U.S. Reciprocal Tariffs on India India’s electronics exports include smart phones, mobile components, consumer electronics like TVs and appliances, and semiconductors. The imposition of a 26% effective U.S. tariff is likely to increase landed costs, potentially reducing the competitiveness of Indian electronics in the U.S. market. While government initiatives like the Production Linked Incentive (PLI) schemes have been fueling growth in this sector, these tariffs could slow that progress. In the short term, a decline in export volumes particularly for consumer products such as smart phones and PCs is possible. Over the long term, Indian companies may respond by diversifying into alternative markets or relocating more manufacturing operations to the U.S. to mitigate tariff impacts. India’s exports in this sector primarily include two-wheelers, electric vehicle (EV) components, and various auto parts. Given the U.S.’s robust domestic automotive industry, the imposition of additional tariffs further widens the cost disadvantage for Indian exporters. EV parts and auto components may see diminished demand as U.S. buyers potentially turn to lower-cost suppliers like Mexico, which benefits from favorable trade agreements. Due to the price-sensitive nature of many Indian automotive exports, the 26% tariff poses a significant barrier, likely discouraging U.S. buyers and impacting overall export volumes. Table No. 1 Impact of U.S. Reciprocal Tariffs on India (Specifically 52% base, 26% discounted) Sector Share (%) Approx. Value (USD Billion) Engineering Goods 24% $18.88 billion Gems and Jewellery 14% $11.01 billion Electronics 11% $8.65 billion Pharmaceuticals 10% $7.87 billion Textiles and Apparel 9% $7.08 billion Automobiles & Auto Parts 7% $5.51 billion Chemicals (excl. Pharma) 6% $4.72 billion Others (Agri, Leather, etc.) 19% $14.94 billion Table No. 1 presents the sector-wise impact of U.S. reciprocal tariffs on Indian exports, specifically under a tariff regime with a 52% base rate and a 26% discounted rate. The data indicates that engineering goods form the largest share of Indian exports to the U.S., accounting for 24% of the total, with an approximate value of $18.88 billion. This makes the sector particularly vulnerable to any tariff increases, as a significant portion of trade could be affected. Gems and jewellery follow, representing 14% of the export share, valued at around $11.01 billion. Given the high value and discretionary nature of these items, this sector may face challenges in sustaining demand under higher tariff conditions. Electronics, which account for 11% or $8.65 billion, are also at high risk due to their price-sensitive nature and global competition. Pharmaceuticals, with a 10% share ($7.87 billion), may be less impacted owing to their essential nature and stable demand. Textiles and apparel (9%, $7.08 billion) also constitute a notable portion of exports and could face moderate pressure, depending on the availability of alternative suppliers and cost dynamics. Automobiles and auto parts, although making up a smaller share at 7% ($5.51 billion), are highly susceptible to tariff increases due to the high price elasticity and strong U.S. domestic competition in this sector. Chemicals (excluding pharmaceuticals) comprise 6% of exports, valued at $4.72 billion, and may face moderate effects depending on the specific product categories. Finally, the “Others” category, which includes agricultural products, leather, and miscellaneous goods, makes up a substantial 19% of the total exports, amounting to $14.94 billion. While this category is diverse, many of its components may be highly sensitive to tariff changes due to their commoditized nature and competition from other exporting nations. In summary, sectors like engineering goods, gems and jewellery, and electronics—owing to their high export value and price sensitivity—stand to be most affected by reciprocal U.S. tariffs, while pharmaceuticals may remain comparatively stable. The overall trade impact will depend on each sector's ability to absorb price increases, find alternative markets, or negotiate tariff relief. 6. Strategic Observations Although India benefits from a reduced reciprocal tariff rate of 26% down from a high base of 52% its goods still face a competitive disadvantage compared to U.S. Free Trade Agreement (FTA) partners like Mexico, Canada, and South Korea. The U.S. emphasis on reciprocity highlights ongoing concerns over India’s tariff barriers, which are often Journal of Research and Development Peer Reviewed International, Open Access Journal. ISSN : 2230-9578 | Website: https://jrdrvb.org Volume-17, Issue-9(I) | Sept - 2025 109 perceived as high, particularly in agriculture, technology, and automotive sectors. India’s path forward lies in capitalizing on its cost advantages and enhancing supply chain efficiencies, engaging in bilateral negotiations to secure sector-specific concessions or mutual understanding, and continuing to attract U.S. firms for co-production or joint ventures to deepen economic ties and offset tariff challenges. Table No.2 Impact of U.S. Reciprocal Tariffs on India Sector Tariff Impact Risk Level Notes Electronics High High Price-sensitive exports; may lose competitiveness. Auto & Auto Parts High High Faces stiff U.S. domestic competition; tariffs raise prices Pharmaceuticals Low Low Less impacted due to demand and essential nature. Textiles/Apparel Medium Medium Alternatives exist, but still competitive. Engineering Goods Medium Medium B2B products; cost matters, but less elastic than consumer goods. Above table no.2 shows the imposition of reciprocal tariffs by the United States on Indian goods is expected to have a varied impact across different sectors, with electronics and auto & auto parts industries facing the most significant challenges. The electronics sector is marked by high tariff impact and risk level, primarily due to its pricesensitive nature. This makes Indian exports in this category vulnerable, as they may lose their competitiveness in the U.S. market when prices rise due to tariffs. Similarly, the auto and auto parts sector also falls into the high-impact, high-risk category. This sector already faces intense competition from established U.S. manufacturers, and the addition of tariffs further raises the cost of Indian exports, reducing their market appeal. In contrast, the pharmaceutical sector appears to be relatively insulated from the effects of these tariffs. With a low tariff impact and risk level, this sector benefits from the essential and non-substitutable nature of many of its products, which is continue to see consistent demand regardless of price changes. The textiles and apparel sector faces a medium level of tariff impact and risk. While alternatives to Indian products exist, the sector retains some competitiveness, especially in niche and valueadded segments. Lastly, engineering goods, which are typically business-to-business (B2B) products, also experience a medium impact and risk level. Although price sensitivity exists, it is less elastic compared to consumer goods, meaning the demand may not drop drastically with moderate price increases. Overall, the tariffs are likely to pressure India’s price-sensitive export sectors, while essential goods like pharmaceuticals may remain largely unaffected. Table No.3 Percentages are approximate, calculated by aligning Ministry of Commerce data with India's total exports to the U.S. Sector Value (in billions) Percentage of U.S. Exports Goods Engineering Goods $17.63 22% Machinery, equipment, and metal products Electronics $10.05 13% Smartphone, telecom equipment, and other electronic goods Gems and Jewelry $9.00 11% Pearls, precious stones, and gold jewelry Pharmaceuticals $8.00 10% Generic drugs and formulations Textiles and Apparel $9.00 12% Ready-made garments and fabrics Automobiles and Auto Parts $2.60 3% Ready-made garments and fabrics Other Sectors (Petroleum, Chemicals, Cereals, etc.) $21.77 29% Auto components and some Table No. 3 outlines the composition of India’s exports to the United States, highlighting the relative significance of different sectors as a percentage of total U.S.-bound exports. The data, aligned with figures from the Ministry of Commerce, reveals that engineering goods represent the largest single category, accounting for approximately 22% of India’s total exports to the U.S., valued at $17.63 billion. This includes machinery, equipment, and metal products, Journal of Research and Development Peer Reviewed International, Open Access Journal. ISSN : 2230-9578 | Website: https://jrdrvb.org Volume-17, Issue-9(I) | Sept - 2025 110 reflecting the strength of India's industrial manufacturing base. Electronics follow with a 13% share, amounting to $10.05 billion. These exports include smart phones, telecom equipment, and various electronic components items that are highly integrated into global supply chains but also sensitive to price fluctuations and tariffs. Gems and jewelry, a traditional export stronghold, contribute 11% ($9.00 billion), encompassing pearls, precious stones, and gold jewelry. These luxury items are vulnerable to shifts in consumer demand and tariff impositions due to their discretionary nature. Pharmaceuticals, making up 10% of exports ($8.00 billion), consist largely of generic drugs and formulations. This sector remains relatively resilient due to the essential and often non-substitutable nature of its products. Textiles and apparel also play a significant role, contributing 12% or $9.00 billion, largely driven by ready-made garments and fabrics. Despite being exposed to competitive pressures, Indian textiles retain a significant presence due to their costeffectiveness and scale. Automobiles and auto parts account for a comparatively small share at 3%, totaling $2.60 billion. This lower figure reflects both tariff sensitivity and stiff competition from U.S. and other global manufacturers. Finally, the "Other Sectors" category, which includes petroleum products, chemicals, cereals, and more, forms the largest combined share at 29% or $21.77 billion. This diverse segment underscores India’s broad-based export footprint to the U.S., although many of these goods are commodity-based and sensitive to price shifts. Overall, the table underscores that while engineering goods, electronics, and textiles are core to India’s export basket to the U.S., the diversity across sectors means any changes in trade policy such as reciprocal tariffs will have varied impacts depending on the nature of the goods, their demand elasticity, and global competition. Challenges for India India faces several challenges in scaling its manufacturing and export potential. Its infrastructure covering logistics, transportation, and industrial zones remains underdeveloped compared to China and the EU, limiting rapid expansion. Additionally, the tariff differential, with the EU at 20% versus India’s 26%, may lead some U.S. importers, especially those handling high-value or precision goods, to continue favoring European suppliers. Finally, transitioning large portions of global supply chains to India will require time and increased efficiency for the country to fully capitalize on emerging opportunities. Global Implications of U.S. Tariff Shifts The U.S.’s recent tariff increases, introduced under the “Make America Wealthy Again” policy on April 2, 2025, are expected to provoke reactions from global trading partners. These could include heightened tariffs and retaliatory actions, adding volatility to international markets. Given the U.S.’s position as the world’s largest economy, such trade measures have far-reaching effects, disrupting global supply chains, undermining market confidence, and potentially driving up the global volatility index. Conclusion The 2025 reciprocal tariffs imposed by the United States present both challenges and opportunities for India’s export trade. While sectors such as automobiles and electronics will face higher landed costs due to a 26% effective tariff, the overall impact on India’s exports is expected to be limited in scale, affecting less than 3% of total outbound trade. Key sectors like pharmaceuticals remain exempt, and textiles could gain ground due to steeper tariffs on competing countries. India’s lower tariff burden compared to China (54%) and Vietnam (46%), combined with its growing manufacturing capacity and strategic policy initiatives, and positions it as a viable alternative for U.S. importers seeking supply chain diversification. While infrastructure and tariff disparities with the EU remain areas for improvement, India’s proactive trade engagements such as the pursuit of a bilateral trade agreement with the U.S. signal a clear intent to deepen economic ties and mitigate risks. In summary, the reciprocal tariffs of 2025 are unlikely to significantly disrupt India’s export momentum. With careful policy calibration and investment in competitiveness, India stands to convert trade friction into opportunity, reinforcing its role in global supply chains. References: 1. https://cleartax.in/s/reciprocal-tariffs-us-india-impact 2. https://www.icicidirect.com/research/equity/finace/impact-of-increased-reciprocal-tariff-on-different-sectors-ofindia 3. https://www.grantthornton.in/insights/articles/trumps-reciprocal-tariffs-a-challenge-or-a-catalyst-for-india-us-trade 4. https://www.outlookbusiness.com/columns/maneuvering-usas-reciprocal-tariff-impact-options-and-strategies-forindia 5. https://www.reddit.com/r/neoliberal/comments/1iw9f4t