Impact of Reciprocal Tariffs on Indian Exports

The uncertainty surrounding the implementation of reciprocal tariffs by the US administration in the United States has led American buyers to put fresh orders from India on hold and delay existing ones. This cautious approach is significant as the US is India's largest export market.

Key Points

• American importers are waiting for clarity on how the reciprocal tariffs will be implemented before placing new orders.
• The US accounts for nearly a fifth of India's $76.4 billion in shipments during the April-February period of FY25.
• Western European buyers are also scaling back orders due to economic uncertainties fueled by EU-US tensions and additional American tariffs on steel, aluminum, and automobiles.

Statements from Industry Leaders

• The Director-General of the Federation of Indian Export Organisations (FIEO), noted that US buyers are refraining from placing new orders due to the lack of clarity on how the reciprocal tariffs would be calculated.
• He highlighted concerns about the quantum of tariffs, whether costs would be passed on to customers, and the need for strategic decisions once details are provided.
• Buyers have requested exporters to limit shipment volumes for previously placed orders.

Current Shipment Concerns

• Shipments transported by sea arriving after April 2 may be subject to new tariffs, increasing uncertainty for exporters.
• Industry leaders indicate no immediate risk of large-scale order cancellations, although some buyers have asked to pause shipments.
• The Secretary-General of the Confederation of Indian Textile Industry (CITI), stated that while some orders are on hold, there is no indication of outright downsizing.

Sector-Specific Impacts

• The pharmaceutical sector remains less affected, with existing healthcare-related orders being executed.
• The Director-General of Pharmexcil, mentioned that future shipments in the pharmaceutical sector depend on the unfolding of the tariff policy.