President Donald Trump of the United States has introduced a Reciprocal Tariff, dubbing the day as 'Liberation Day'. Under the new tariff rates, the U.S. will impose tariffs of 34% on China, 20% on the European Union, 24% on Japan, and 27% on India. Assessing its impact on India, certain sectors might feel the pinch, yet others like the textile-garment and pharma sectors could experience a boom.
Why Will India Benefit in These Sectors?
Let's first understand why sectors like textiles could benefit despite the U.S. Reciprocal Tariff. Notably, the U.S. engages in trade with multiple countries, and comparing the Trump Tariff, nations such as China and Vietnam are subject to higher tariffs than India. Consequently, imports from these countries are becoming more expensive compared to India, providing Indian companies an opportunity to expand their market share.
High Demand for Indian Textiles in America
Despite the U.S. Reciprocal Tariff, substantial opportunities arise in India's textile sector. America remains a primary buyer of Indian textiles, with this sector potentially seeing the adage 'finding opportunity in adversity' come to life. For example, in 2023-24, India's total textile exports amounted to around $36 billion (over 3 trillion rupees), of which America accounted for about 28% or $10 billion (about 85,600 crores rupees).
Source: aajtak
This sector has consistently grown, evidenced by the rise in the U.S. share from 21% in 2016-17 to 29% in 2022-23. Reports indicate that India accounts for 58% of carpet exports, 50% of other manufactured textiles, 44% of laminated textiles, and about 33% of woven and non-woven fabrics heading to the U.S.
Competing with China, Vietnam, and Bangladesh
However, India's share in U.S. textile imports is considerably smaller compared to China, Vietnam, and Bangladesh. In 2024, India's share was only 6%, while China's was 21%, Vietnam's was 19%, and Bangladesh's was 9%.
Source: aajtak
Opportunity for India to Expand
Here's why this can be advantageous for India: President Trump has levied 34% tariffs on imports from China, 46% on Vietnam, and 37% on Bangladesh. In comparison, India's tariff stands at 27%, which is notably lower than these major competitors, benefiting the Indian textile industry.
This means that Indian textiles in the U.S. will be cheaper than those from other countries, potentially boosting sales. Hence, Indian companies can expand their businesses, earning substantial profits while increasing their share in the U.S. market. This growth will not only benefit the textile industry but also enhance job opportunities in this sector in India.
Pharmaceutical Sector Set to Soar
While the textile sector could gain despite the tariffs, the Indian pharma sector is also being acknowledged by the U.S. The White House excluded pharma products from these tariffs due to high demand for Indian generic medicines in America. Reportedly, India exports approximately $9 billion in pharmaceuticals to the U.S. Therefore, significant potential now exists to boost Indian businesses in this sector.
