US tariffs on India: Barclays sees 70% of shipments to be 'under serious threat'

The additional 25% US tariffs, which came into effect on Wednesday, have sent Indian exporters and a lot executives in a shockwave. Now, Barclays has cautioned that nearly 70% of India’s merchandise exports to the United States face a “serious threat” after Donald Trump's latest move, Times of India (TOI) has reported. The US is India’s largest export destination, accounting for 18% of total shipments in 2024, worth $80 billion. With exemptions for smartphones, petroleum products, and pharmaceuticals, about $55 billion worth of exports—roughly 70% of US-bound goods—remain exposed to the higher duties. Electrical machinery and gems and jewellery are among the most affected sectors.India can get 25% off its tariffs if New Delhi stops buying Russian oil, says Trump's trade adviser Peter Navarro“The risks to growth for the Indian economy have become more real,” Barclays said in its latest report, adding that ties have shifted from being a “good friend” to a “bad trading partner.” Barclays noted that India is at a disadvantage compared to other emerging economies. Except for Brazil, which faces similar tariffs for reasons outside of trade imbalances, most developing nations including India's neighbours like Pakistan and Bangladesh are subject to much lower rates. The report highlighted that while the smartphone exemption offers relief under India’s production-linked incentive scheme, labour-intensive sectors such as apparel, leather, footwear, and jewellery will struggle with combined tariffs of up to 60%. The pharmaceutical sector, worth $8.7 billion in US exports in 2024, is currently shielded but faces uncertainty, as President Trump has signalled potential tariffs of up to 200% within 12–18 months.India’s Export Shield Despite the immediate setback, India retains some buffers. The exemption on smartphones and pharmaceuticals offers crucial protection to two of its fastest-growing export categories. In addition, India’s strategic imports of discounted Russian crude have helped the economy save an estimated $7–10 billion in recent years, cushioning external pressures. India’s government is also working on domestic measures. Prime Minister Narendra Modi recently announced GST rationalisation to boost consumption, while schemes such as the Emergency Credit Line Guarantee Scheme (ECLGS) may be revived to support MSME exporters. Industry groups have demanded interest subvention, repayment moratoriums, and higher RoDTEP duty refunds, with the government considering a five-year extension of RoSCTL benefits for apparel.Meetings at the highest levels are ongoing to assess the situation, though officials ruled out any retaliation. “Deliberations in the government have been ongoing and meetings with the industry are also taking place,” said an official.“The Export Promotion Mission and other proposals such as SEZ amendments are being considered,” said another official. On the trade front, New Delhi is seeking to diversify beyond the US. Barclays highlighted that the US dominates in eight of India’s top ten export categories, but alternative markets are gaining importance. The UAE and UK are emerging as key destinations for sectors such as textiles, machinery, and pharmaceuticals, with free trade agreement talks underway with the EU, Chile, Peru, New Zealand, and Oman.