April 2, 2025, marks ‘Liberation Day’, a term Donald Trump uses to justify imposing reciprocal tariffs on imports from all nations with which the US has a trade deficit. He argues that other countries impose higher duties on American goods while the US keeps its tariffs low, creating a $1 trillion trade deficit.
Trump insists these tariffs will be “nicer” than what other nations charge the US, yet specific details remain unclear. The White House has confirmed an official announcement on April 2, but it is uncertain whether the tariffs will be product-based, sector-specific, or countrywide.
With the US serving as India’s largest trading partner, potential repercussions loom large. The key question is: How will this affect India’s booming exports?
India-US Trade Relations: A Strong but Vulnerable Partnership
Since 2021, the US has been India’s top trading partner, accounting for 18% of total exports. Bilateral trade stood at $119.71 billion in 2023-24, with India exporting $77.51 billion worth of goods while importing $42.19 billion. This resulted in a trade surplus of $35.31 billion for India.
Major exports from India to the US include:
– Electronics (mobile phones – $11.1 billion)
– Pharmaceuticals ($8.1 billion)
– Telecom instruments ($6.5 billion)
– Gems & Jewelry ($3.2 billion)
– Textiles (cotton garments – $2.8 billion)
– Iron & steel products ($2.7 billion)
India’s imports from the US include:
– Crude oil ($4.5 billion)
– Petroleum products ($3.6 billion)
– Coal & coke ($3.4 billion)
– Cut & polished diamonds ($2.6 billion)
– Electric machinery ($1.4 billion)
– Aircraft & spacecraft parts ($1.3 billion)
Any tariff hike could disrupt trade, raising costs for American buyers and weakening demand for Indian goods.
Which Indian Sectors Are at Risk?
While details of Trump’s tariff plan remain uncertain, analysts predict that some sectors will suffer more than others.
1. Electronics – India’s Biggest Export Faces Uncertainty
– Mobile phones are India’s largest export to the US, valued at $11.1 billion in FY24.
– A 9% tariff differential already exists on electronic goods.
– Further hikes could reduce competitiveness, making Indian exports more expensive.
2. Gems & Jewelry – A Luxury Market at Risk
– The US accounts for 30% of India’s total gems and jewelry exports.
– Increased tariffs could dampen demand, affecting gold, diamond, and gemstone sales.
3. Agriculture – Seafood, Meat, and Processed Food May Suffer
– India exports $2.58 billion worth of seafood, fish, and meat to the US.
– These products already face a 27.83% tariff differential, which could rise further.
– Processed food, sugar, and cocoa ($1.03 billion) may also struggle if tariffs increase by 24.99%, making Indian products pricier in the US.
4. Textiles & Apparel – Exports Could Slow Down
– India’s cotton garments and apparel exports to the US total $2.8 billion.
– Any increase in tariffs would reduce India’s competitive advantage in the US fashion industry.
5. Auto Industry – A Limited Impact, But Opportunities Exist
– India’s auto exports to the US are low ($10 million), minimizing tariff-related risks.
– However, higher duties on auto components could create opportunities, as Mexico, Canada, and China—major US suppliers—may face even steeper tariffs.
How Much Could India Lose? The Economic Impact
Trade analysts estimated that India could lose up to $7 billion annually if Trump’s tariffs are aggressively implemented.
Additionally, economic experts warn that India’s GDP growth may slow down by 5-10 basis points, reducing the forecast from 6.6%. The gems, jewelry, electronics, and agricultural sectors will experience the biggest setbacks.
A study by Morgan Stanley suggests India’s tariffs could rise by 4-6 percentage points, squeezing profit margins for exporters.
India’s Response: Preparing for the Worst?
Uncertainty surrounds India’s next move, but negotiations are underway. Over the weekend, US Deputy Secretary of State Christopher Landau met with India’s Foreign Secretary Vikram Misri to discuss reducing trade barriers.
President Trump claims India has agreed to substantially lower tariffs on American goods, but the Ministry of External Affairs has not confirmed this.
For now, Indian policymakers are taking a cautious approach, waiting for specific tariff details before making strategic trade decisions.
Will ‘Liberation Day’ Trigger a Trade War?
The true impact of Trump’s Liberation Day tariffs depends on how they are implemented. A targeted approach would allow India time to adjust, but broad-based tariffs could disrupt the $77.51 billion export market.
As India awaits clarity, one thing is certain—‘Liberation Day’ may redefine US-India trade relations. Whether it frees the US from foreign dependence or sparks global economic disruption remains to be seen.