Textiles, auto components and telecom vulnerable to tariff war

Chennai: US, being the largest market for India, probable tariff hikes under the Trump presidency can impact shipments of certain segments, including textiles, chemicals, metal products, and telecom products. However, products like cut and polished diamonds and pharma may remain unaffected.

In some categories, the US can substitute with imports from other countries and a few categories will lose their competitiveness, finds ICRA.

Historically, textile exports from India have been vulnerable to any broader trade policy changes by developed countries due to their influence on demand, pricing and currency movements. Any adverse policy action around tariffs or taxes could affect India's competitiveness against countries like Bangladesh and Vietnam.

Similar is the case of auto components as the products will lose their competitiveness. Exports form a significant share in the Indian auto component industry, with the US being a major export destination.

In the case of dyes and pigments, organic, inorganic and miscellaneous as well as residual chemicals, India is a major exporter. China is also a significant player and this may keep the market relatively stable. However, ICRA anticipates that some volumes could be affected by substitution from other countries if tariffs rise.

Though exports of metals are relatively less, downstream products like tubes, pipes, fittings, sheets and foil will have an impact due to additional duties.

In telecom products, the US has a 34 per cent share in global exports. Any rise in duties could impact the Indian export volumes substantially, which may be replaced by countries with whom the US has Free Trade Agreements (FTA).

However, there are a few resilient categories as well. India accounts for 90 per cent of the cut and polished diamonds consumed across the world. The US represents almost half of the global polished diamond demand. In case an import levy is imposed, there could be minimal impact on overall exports, given the high reliance of the US on India for the supply of CPD and lack of alternative suppliers.

Further, the US has a significant reliance on other countries for raw materials and finished pharmaceutical products. Given that these products are essential supplies, the new government is unlikely to alter taxes or duties on them. Similarly, agrochemicals are important for food security and hence the duties and taxes may not change.

The share of the US in India’s merchandise exports increased from 14 per cent in FY2015 to 18 per cent in FY2024.