India-US Tariff War: Which sector of India will not be affected by Trump's 'tariff bomb'? In which sector did the US see its self-interest?

India-US Tariff War: From 27 August 2025, the US has imposed a 50% tariff on goods imported from India, which includes a 25% basic tariff and a 25% additional tariff. The move is in response to India buying oil and military equipment from Russia. However, the US has excluded certain sectors—such as pharmaceuticals, smartphones, and petrochemicals—from this tariff keeping its interests in mind, so that these sectors will not face any additional duty. In this article, we will analyze the sectors that will be affected by this tariff and those that will not, as well as understand its impact on India's export strategy.

Sectors unaffected by tariff

1. Generic medicines: US dependence

The demand for Indian generic medicines is very high in the US market. 90% of prescriptions in the US are for generic medicines, of which 40% are imported from India. In 2024, India exported $9.5 billion worth of medicines to the US, and the tariff on these will remain zero. This exemption has been given because the US cannot meet its generic drug demand through indigenous production. This is a huge opportunity for the Indian pharmaceutical industry, as it not only maintains profits but also strengthens India's position in the global supply chain.

2. Smartphones: India's growing strength

India has made significant progress in smartphone exports. In 2024-25, India exported $10.6 billion worth of smartphones to the US, and this sector will also remain tariff-free. According to a July 2025 report, India has overtaken China to become the top supplier in the US smartphone market, with its share growing from 13% to 44%. This achievement is a result of India's 'Make in India' and PLI (Production Linked Incentive) scheme, which encouraged companies like Apple and Samsung to increase production in India.

3. Petrochemicals: Stable tariffs

Tariffs on petrochemicals, which account for $4.1 billion in exports, will remain stable at 6.9%. The sector is important to the US, and tariff exemptions will maintain India's competitiveness. However, according to India Ratings and Research, chemical exports (which include petrochemicals) could decline by $2-7 billion in FY26, as some chemical products may be vulnerable to tariffs.

Sectors affected by tariffs

According to a Global Trade Research Initiative (GTRI) report, $60.2 billion (about 66%) of India's total exports of $86.5 billion will be hit by a 50% tariff. This is expected to lead to a sharp decline in many labour-intensive sectors, which could impact millions of jobs.

1. Garments and home textiles

Garments: Tariffs on $3.4 billion worth of exports have increased from 12% to 62%. This is a big blow to India's textile industry, which has a 29% market share in the US. Competition from countries like Bangladesh and Vietnam is likely to increase.

Home textiles: Tariffs on $3.0 billion worth of exports have risen from 9% to 59%. This will impact demand for products like carpets and furniture.

2. Shrimp

Tariffs on shrimp exports, which are worth $2 billion, have risen from zero to 60%. India's shrimp exports are important to the US and China, but this tariff will affect lakhs of farmers in states like Andhra Pradesh. Price cuts have already begun as orders have stopped.

3. Jewellery and diamonds

Jewellery: Tariffs on $3.6 billion worth of exports have risen from 5.8% to 55.8%. This puts jobs of artisans in centres like Surat and Mumbai at risk.

Diamonds: Tariffs on $4.9 billion worth of exports have risen from zero to 50%. Rising demand for lab-grown diamonds in the US is already impacting this industry, and tariffs will weaken it further.

4. Machinery and auto parts

Machinery parts: Tariffs on $6.7 billion worth of exports have increased from 1.3% to 51.3%. Small and medium enterprises, which account for 40% of the sector, will be the most affected.

Auto parts: Tariffs on $6.4 billion worth of exports have increased from 1% to 26-51%. This will increase the cost of car production and repair, which could reduce India's share.

Challenges and opportunities for India

This tariff could reduce India's exports by up to 43%, bringing down exports from $86.5 billion to $49.6 billion by 2026. This could reduce India's GDP growth rate from 6.5% to 5.6%.

However, the Indian government has started making strategies to deal with this crisis. The Commerce Ministry has planned to increase exports by making 30 new countries the focus market, which will reduce dependence on the US market. There is a possibility of increasing engineering and textile exports to Europe (Germany, UK) and ASEAN countries (Singapore, Malaysia).