Reciprocal tariffs in the United States: Assessing the impact on India

Quick Overview

• U.S. imposes a 26% reciprocal tariff on Indian importsaims to balance trade differences.
• 25% tariff on blankets for all foreign-made cars May affect Indian car exports.
• Minimum direct impact on Indian automakersbut potential long-term challenges are imminent.

On April 2, 2025, President Donald Trump announced a series of extensive tariffs in accordance with the “reciprocal tariff” policy. This includes a 26% tariff on imports from India, which is intended to reflect India’s own tariffs on U.S. goods. In addition, a 25% tariff on all foreign-made cars was introduced.

Current trade trends

The U.S. currently imposes a 2.5% tariff on passenger car imports, while India imposes a 70% tariff on similar imports. This huge gap has been the point of debate, leading to a recent shift in U.S. policy.

Impact on Indian car exports

India’s passenger car exports to the United States are relatively modest, with a total of US$8.9 million in 2024, accounting for only 0.13% of India’s total vehicle exports of US$6.98 billion. Similarly, commercial vehicle exports to the United States account for about 3% of the total. Given these figures, the direct impact on Indian original equipment manufacturers (OEMs) is expected to be minimal.

Potential long-term impact

Although short-term impacts may be restricted, new tariffs may present long-term challenges:

• Auto Parts Export: Indian auto parts suppliers exported to the United States may face less competitiveness due to higher costs, which may lead to reduced orders.
• Supply Chain Notes: Companies relying on U.S. imported products for components may increase costs, which will affect overall production costs.
• Investment decisions: The tariff environment may affect future investment strategies and companies may reconsider expansion plans or explore alternative markets.

Industry reaction

Indian auto industry leaders are closely monitoring this situation. Some are considering diversifying their export destinations to mitigate risks associated with U.S. market dependence. In addition, it may be important to focus on strengthening the domestic market and exploring emerging markets with favorable trade terms.

The final thought

The new US tariff Salvo appears to be a plot twist in the global trade legend. While our automatic exports to the United States aren’t entirely sensational, it’s always wise to focus on the horizon. After all, in the trade world, it is best to expect something unexpected and make our engines struggle to bend over any detours ahead.