On April 9, 2025, the US administration announced a 90-day pause on the implementation of reciprocal tariffs, meaning the 26% duty on imports from India has been put on hold for 90 days. A 10% baseline tariff on imports, which came into force on April 5, 2025, shall continue to apply to all countries, including India.
US Tariffs and India’s Major Sectors: Impact, Development, and Opportunities
Impact of US Tariffs on the Electronics Sector in India
The US tariff war continues to significantly impact global economies. The United States has proposed the imposition of a 10% baseline tariff rate, along with an additional reciprocal tariff of 26% on imports from India. However, a 90-day tariff pause has been announced, during this period, both India and US have actively started engaging in negotiations, aiming for the swift and mutually beneficial conclusion of a multi-sectoral Bilateral Trade Agreement (BTA).
Notably, the electronics sector has been temporarily exempted from these tariffs and is proposed to be classified under semiconductor-specific industry.
What Electronics Are Covered Under the Zero Tariff Exemption?
The US administration has excluded certain electronic consumer products from its proposed reciprocal tariffs. These exemptions include:
– Smartphones, personal computers (PCs), and laptops
– Hard drives, processors, and memory chips
Additionally, industrial electronic items such as:
– Machines used in semiconductor manufacturing
– Communication equipment
– Solar cells, flat-panel displays
– Flash drives, memory cards, solid-state drives
– AI servers are also covered under this exclusion.
What Is the Scale of India’s Electronics Exports?
Electronics exports from India have surged to US$ 22.5 billion during the first eight months of FY 2024–25, registering a nearly 28% increase compared to US$ 17.66 billion in the corresponding period of FY 2023–24. A significant portion of this growth is driven by smartphone exports, which have risen to US$ 13.11 billion, reflecting a remarkable 45% increase from US$ 9.07 billion in FY 2023–24. This sharp growth is largely attributed to the momentum provided by the Smartphone Production Linked Incentive (PLI) scheme. Currently, smartphones account for 58% of India’s total electronics exports, with this share expected to rise further to 60–65% by the end of FY 2024–25.
Does This Present an Opportunity for India’s Electronics Industry?
With a 20% tariff advantage over China, India maintains a competitive position, particularly in smartphone manufacturing. If the current tariff exemption continues, it can enable global tech players like Apple to diversify their supply chains away from North America and scale up operations in India. Increased investments in tech manufacturing are also encouraging more component manufacturers to establish their presence in India.
At the same time, India is actively engaged in discussions with the US for the conclusion of a mutually beneficial, multi-sectoral Bilateral Trade Agreement (BTA).
Given these developments, supported by India’s large, skilled, and talented workforce, strong tech-engineering base, ongoing initiatives such as the Production Linked Incentive (PLI) schemes, and a focused target to double domestic value addition in electronics are expected to further strengthen its electronics manufacturing ecosystem, especially in comparison to other South-East Asian economies.
Impact of U.S. Tariffs on the Pharmaceutical Sector
On April 5, a 10% tariff on imports was introduced by the U.S. administration, initially exempting pharmaceuticals and semiconductors. A 90-day pause on these tariffs offered temporary relief to the pharmaceutical industry. However, recent statements from the Trump administration confirm that the sector will eventually be subject to separate tariffs.
US tariffs & Pharmaceutical sector:
The Trump administration has initiated investigations under Section 232 of the Trade Expansion Act into pharmaceutical imports, citing potential national security concerns. The objective is to reduce U.S. reliance on foreign pharmaceutical ingredients and related products. According to Reuters, this move places the pharmaceutical sector at risk of being included in a broader tariff framework under national security grounds.
Next Steps – A Possible Silver Lining:
India stands as the third-largest producer of pharmaceuticals globally (by volume), exporting to nearly 200 countries, with the U.S. as the primary destination. Indian exports, primarily comprising generic medicines, could face challenges in cost recovery due to the anticipated tariffs. This may result in short-term disruptions across the supply chain.
Given these uncertainties, Indian pharmaceutical companies need to remain agile and proactive. Strategic focus should shift towards market diversification, enhanced production of high-margin products, and supply chain optimization. Any price increases must be carefully evaluated, keeping in mind the price sensitivity of end consumers.
The possibility of Free Trade Agreements (FTAs) offers a potential path to more stable and mutually beneficial trade relations. In the interim, the 90-day window provides a critical opportunity for Indian pharmaceutical companies to reassess and realign strategies. Moreover, the time-intensive nature of the U.S.’s transition to domestic pharmaceutical production plays in India’s favor.
If Indian pharma players act swiftly and strategically, this situation could evolve into an opportunity to further strengthen India’s position as a global pharmaceutical powerhouse.
Latest Update
May 2025
The U.S. government’s new “Most Favored Nation” (MFN) drug pricing policy, aimed at aligning American prescription drug prices with the lowest prices globally, could significantly impact Indian pharmaceutical companies, which are major suppliers of generic medicine to the U.S. This move may force Indian firms to lower prices in the U.S. market, affecting their profit margins and potentially prompting price increases in other markets, including India. As nearly one-third of India’s pharma exports go to the U.S., the policy poses a serious challenge to the industry’s global pricing and trade strategies.
June 2025
U.S. officials are currently on a visit to India for the next round of trade negotiations, to finalize an interim trade agreement before the 90-day tariff suspension expires on July 9, 2025. The key objective for India is to seek an exemption from the currently paused 26% reciprocal tariff imposed by the U.S. administration. This visit is part of the broader effort to conclude the first phase of the India–US trade pact and enhance bilateral trade cooperation.
On June 3, 2025, U.S. Commerce Secretary Howard Lutnick expressed affirmation about finalizing a U.S.-India trade agreement in the near future. He acknowledged India’s proactive efforts in the negotiations, to reach a mutually beneficial deal. The bilateral trade discussions are progressing on favorable pace.
The proposed agreement aims to enhance economic cooperation between the two nations, potentially addressing issues such as tariff reductions, market access, and investment opportunities. Both countries have been engaging in sector-specific talks to lay the groundwork for this comprehensive trade deal.
June 27, 2025-Latest Update
India’s trade delegation has extended its stay in Washington to negotiate a deal to resolve all trade differences. The in-person meeting between Indian and U.S. officials, initially scheduled for June 27, was extended by a day, signaling progress toward an interim trade agreement.
India, from the proposed deal, is seeking full exemption from the 26% reciprocal tariffs, which were announced by the US administration on April 2 for several key exports. If the trade agreement is not finalized, India might face renewed tariff pressures. India’s stand to resist the US demands, where Washington seeks access to India’s agricultural market for genetically modified crops along with other sectors such as dairy and energy, has created certain disagreements among the officials of both countries. However, both sides are keen to come to a closure on such grounds to move towards an effective trade deal.
July 7, 2025
Trump Administration Extends Tariff Pause to August 1, 2025
On Monday, July 7, 2025, the White House formally announced that the imposition of additional tariffs has been delayed for the second time, now extended until August 1, 2025, from the earlier date of July 9, 2025. This decision has provided significant relief to global trade partners amid ongoing negotiations with the U.S. Administration.
U.S. Announces fresh round of additional tariffs on 14 countries
The announcement of a fresh round of tariffs on 14 countries, ranging from 25 to 40% was detailed through the official letters that were sent out. These additional tariffs will take effect from August 1, 2025. The Administration further stated that if these nations respond with higher reciprocal tariffs, the U.S. will reinstate the current 25% rate accordingly. The U.S. will impose 25% tariffs on Japan, South Korea, Kazakhstan, Malaysia, and Tunisia; 30% on South Africa and Bosnia and Herzegovina; 32% on Indonesia; 35% on Bangladesh and Serbia; 36% on Cambodia and Thailand; and 40% on Laos and Myanmar, if these nations fail to conclude a trade deal with the U.S. by August 1, said the GTRI founder
India’s take on the evolving trade landscape
India’s Minister of Commerce has stated that the country’s ambitious trade deal with the U.S. will not be signed under any external deadlines or imposed timelines, reaffirming that the agreement will be finalized in alignment with India’s national interests.
