Auto, pharma, electronics better placed; apparel and jewellery most exposed to reciprocal tariffs: Emkay

Broad country-level reciprocal tariff is likely to be the most common outcome by the Trump administration 2.0, analysts at Emkay Global Financial Services told reporters on March 27. 

According to Emkay, while auto, pharma and electronics are likely to be insulated from reciprocal tariffs, apparel and jewellery are the most exposed. The financial services company estimates India would potentially lose $6 billion (0.16% GDP) in exports to the US (at 10% broad tariffs), with this rising to $31 billion at 25% tariffs. 

“While the nature of reciprocal tariff implementation is unclear, we believe a broad country-level tariff by the US is the most likely scenario, given complications around sector/commodity-level tariffs,” analysts said. 

The financial services company suggests that India will need to strive harder to gain opportunities from a global tariff war. “Having progressed marginally in high-skill product value chains, India has captured only a small share of the low-skill pie that China vacated post-Covid. Tariffs on Mexico and Canada offer some potential opportunities, but gains (if any) will take time to accrue, given the highly integrated North American supply chains,” Madhuri Arora, chief economist at Emkay Global Financial Services, said. 

Notably, in the wee hours of March 27, the Trump administration imposed a sweeping 25% permanent tariff on the cars that are imported to the US, sending shockwaves to the global automotive industry. In India, shares of Jaguar Land Rover-parent Tata Motors, auto component manufacturer Samvadhana Motherson, Sona BLW, and Bharat Forge tumbled up to 7%. 

According to Emkay, India exported $2.6 billion worth of automobiles and auto components to the US in FY24, which was 13% of India’s total exports of $20.9 billion in this category. India’s imports from the US were only $0.6 billion (8% of total imports). “However, cars and motorcycles are a very small part of India’s auto trade with the US (FY24 exports of $0.2 billion, imports of $0.06 billion). The majority of India’s exports to the US are auto parts and accessories (FY24: $2.1 billion), with $0.5 billion of imports from the US of the same. Thus, while reciprocal tariffs on cars and motorcycles could be as high as 70%, India barely exports these to the US in the first place,” says Harshal Patel, research associate at Emkay.

“On the other hand, India charges 15% import duty on parts and accessories, with the US charging 2.5%, implying reciprocal tariffs of 12.5%. Therefore, imposing high tariffs on Indian PV and bike exports to the US will make no difference to domestic OEMs. Auto component makers are exposed, but tariffs on China, Mexico and Canada may provide some opportunities,” he adds.