From Pharma Gains to Jewellery Pain: India’s Mixed Reaction to U.S. Tariffs

Dr. Pavithra .M R, Assistant Professor, Paari School of Business, SRM University – AP

The United States latest sweeping tariffs have shaken the global economy, hitting India particularly hard across various industries. As of April 5, a standard 10% tariff now applies to all U.S. imports but for India the figure jumps to a steep 26% amplifying the economic strain.

Jewellery Exports Face Sharp Decline

India’s $32 billion gems and jewellery industry is bracing for a sharp downturn as newly imposed U.S. tariffs take their toll. With the U.S. accounting for around $10 billion over 30% of India’s exports in this sector, the stakes are high. The industry was already struggling, having seen a 14.5% drop in exports during the 2023-24 fiscal year largely due to weakening demand in China. Leading voices, including Colin Shah of Kama Jewellery and Shaunak Parikh from the Gem and Jewellery Export Promotion Council, have raised alarms over the severity of the tariff’s impact. Given India’s pivotal role in diamond cutting and polishing sector that employs millions will face a serious economic challenge because of these trade barriers. However, ongoing negotiations with the U.S. offer a glimmer of hope for a bilateral agreement that could ease the burden.

Pharmaceutical Sector Gains Temporary Relief

In contrast, India’s pharmaceutical industry has secured a temporary lifeline, as the U.S. administration has exempted pharmaceutical products from the newly imposed tariffs. This exemption sparked a rise in Indian pharma stocks, with the sector’s index elevated to 5% which is its most significant intra-day jump in over four years. The U.S. remains a vital market for Indian pharmaceutical exports which totalled around $9 billion last year accounting for nearly a third of India’s total pharma trade. Industry giants like Dr. Reddy’s, Gland Pharma, Cipla and Sun Pharma saw impressive gains in response. However, analysts warns that future tariffs on pharmaceuticals cannot be entirely ruled out underscoring the need for continued vigilance in an uncertain trade landscape.

Automotive Industry at a Crossroads

Amid shifting trade dynamics, India is weighing substantial tariff reductions on electric vehicles (EVs) as part of a broader strategy to secure a trade deal with the United States, a move that has sparked resistance from domestic automakers. The government is considering lowering EV tariffs in the initial phase of bilateral negotiations, a decision that could pave the way for foreign giants like Tesla to enter the Indian market. However, homegrown manufacturers such as Tata Motors and Mahindra & Mahindra which have heavily invested in local EV production argue that abrupt tariff cuts could erode their competitiveness. As India pushes to accelerate EV adoption from 2.5% to 30% by 2030, policymakers must strike a delicate balance between fostering international trade and safeguarding domestic industry growth.

Currency and Market Volatility

Financial markets have not been immune to these trade tensions. The Indian rupee is anticipated for a sharp decline. Following the U.S. tariffs, broader weakness across Asian markets is expected to push the rupee’s opening value to around 85.70 - 85.75 per U.S. dollar. Investor sentiment has also taken a hit. On April 1, foreign investors sold a net $740.3 million of Indian shares, signalling decreasing confidence amid escalating global trade tensions.

Regional Implications and Diplomatic Engagements

The impact of U.S. tariffs extends beyond India affecting several Southeast Asian nations including Vietnam, Thailand, Malaysia and Cambodia. These countries are preparing to negotiate with the U.S. after facing unexpectedly high tariffs ranging from 32% to 49%. Vietnam, where exports to the U.S. constitute nearly 30% of its GDP, has been particularly affected. In response, national leaders are mobilizing task forces and signalling their intent to engage in urgent trade negotiations with the U.S., aiming to soften the economic blow and restore stability.

Conclusion

India finds itself at a critical crossroads, struggling with the complexities of the newly imposed U.S. tariffs. While the pharmaceutical sector enjoys a temporary reprieve, industries like jewellery and automotive are confronting formidable challenges. With currency fluctuations and market volatility adding to economic uncertainty, strategic policymaking and proactive negotiation have become essential. As the global trade landscape continues to shift, India’s agility in negotiation and adaptation will be key to protecting its economic interests and ensuring long-term sustainable growth.

“This article is part of the sponsored content programme”

Published - April 04, 2025 02:44 pm IST