US tariff impact: Indian exporters may take a hit on margins

Analysts said to avoid losing the market, at least in the short to mid-term, exporters may have to absorb higher tariffs partially or wholly.

Bengaluru: The ad hoc proposal by the United States to impose a 25 per cent tariff on Indian goods pending the trade deal negotiations will significantly impact Indian exporters both on margins and long-term demand.

To avoid losing the market, at least in the short to mid-term, exporters may have to absorb higher tariffs partially or wholly, analysts said.

According to Ayush Mehrotra, Partner at Khaitan & Co, typically, these impositions and levies are a pass through, which is borne by the consumer.

From a sectoral perspective, these interim measures are likely to impact the discretionary goods like gems and jewellery, textiles, where there may be a slowdown.

"Since the trade deal negotiations are still ongoing and conclusive impact assessment for exporters will depend on the outcome of the same, it may be prudent for the exporters to minutely study their supply terms to assess the potential for price adjustment especially is a complete pass-through is not contemplated in their agreed incoterms," Mehrotra said.

Rishi Mehra, CEO, Aon India, Head of Strategy, Asia Pacific, Aon, said the imposition of a 25 per cent tariff on Indian exports is a significant development that has the potential to disrupt critical sectors, from pharmaceuticals and electronics to textiles and gems.

These industries not only contribute significantly to India’s export economy but also support millions of livelihoods across the country.

"While the immediate impact will be felt in cost structures, supply chains, and global competitiveness, this moment also calls for strategic recalibration. Indian businesses must now double down on innovation, diversify market dependencies, and strengthen domestic capabilities to weather external shocks. It is imperative to reassess trade credit exposures, enhance supply chain transparency, and embed geopolitical risk into board-level planning. The path forward will demand resilience, collaboration, and a renewed commitment to long-term value creation, both for India and its global partners," he said.

Ayush Jhawar, Founder & CEO, Genefied, a QR-powered SaaS for brand protection said while the precise, category-wise impact of the US tariffs on the Consumer Packaged Goods (CPG) is not clear yet, the decision undoubtedly is a strong headwind for the overall growth prospects of the sector.

Among the most impacted categories, Solar comes on top with almost 97 per cent exposure to the US market. The IT sector will also face a dampening in the demand, although the industry might hedge some losses owing to its diversified client base.

Automobiles and pharmaceuticals also figure prominently, with 29 per cent and 21 per cent of their total exports to the US market, respectively. In CPG, processed foods and personal care products are likely to bear the brunt of the 25 per cent tariffs imposed by the US.

“The inflation in the prices of household goods exported by India is also expected to materialise, making these products costlier for US consumers in the coming months. This could dampen the demand for Indian CPG in the US and hurt the prospects of many MSMEs operating in the CPG industry. Tariffs are expected to ignite realignments in the value chain, specifically related to the sourcing, manufacturing, and localisation efforts that have been put in place by the stakeholders in the CPG sector after years of hard work and effort,” Jhawar added.

Saket Gaurav, Chairman & Managing Director, Elista, said, "For the consumer durables industry, market planning is deeply linked to pricing stability and predictable demand cycles. Sudden tariff hikes disrupt that balance, especially when brands are in the midst of evaluating new market entries or scaling up exports. At Elista, we have been actively exploring global expansion, including regions like the Middle East and CIS., but such policy changes force a pause. They alter the cost equation and impact the end-consumer’s purchase power, which in turn affects launch viability and timeline. It is a reminder that while global ambitions are important, resilience and diversification in market strategy are equally critical.”

Garima Kapoor, Economist and Executive Vice President, Elara Capital said, 25 per cent tariff rate is certainly a negative development as it compares to lower rate for peers such as Vietnam, Indonesia and Philippines which compete with India in a similar category of labour-intensive products and electronic goods.

“The exact details of the tariffs on the exempted items such as pharma and the ones that were charged at a differential rate such as iron, steel and auto is unknown as of now, but inclusion of pharma into tariffs should be incremental negative for India’s exports as US accounts for more than 30% of India’s pharma exports. If no deal is signed by Sept-October, we see a downside to the full year GDP growth estimate for India by 20 bps,” she said.

On the positive side, she said it is pertinent to note that any hotchpotch deal which would have compelled India to give concessions to its agriculture and dairy sector may have had much deeper ramifications politically, socially, and eventually on livelihoods.

A well negotiated deal that addresses all aspects of trade, investment and tariff and non- tariff barriers by September October 2025 is likely to yield long term benefits than a hurried deal.

“The India-UK deal template which gave concessions to the auto and open public procurement sector has shown that India is willing to shed its protectionist tag in sectors where it doesn’t impact the marginal producer, which is a huge departure from its earlier stance,” Kapoor added.