India Ratings and Research said on Friday that while the 26% reciprocal tariff imposed by the US on Indian goods may not have a direct material impact on trade, a secondary ripple from global supply chain imbalances and investment caution could hit realisations across sectors such as chemicals, textiles, steel, and industrial machinery.
“Reciprocal tariffs, while having limited direct impact for India, create uncertainty and the risk of volatility in global markets,” said Rakesh Valecha, senior director, core analytical group, India Ratings.
Sector View: Winners, Losers, And Watchpoints
Textiles & Electronics – Near-Term Advantage, Long-Term Watch
India's 26% tariff compares favourably with higher levies on rivals like China (34%), Vietnam (46%), and Cambodia (49%). Exporters in apparel, home textiles, and mobile phones may benefit from a pricing edge in the US market. However, capacity constraints and buyer approval timelines could delay gains, Ind-Ra said.
Chemicals – Export Opportunity Vs Import Threat
India's chemical exports to the US could become more competitive amid higher tariffs on Chinese peers. But Ind-Ra flagged a growing risk of Chinese re-exports flooding the Indian market, pressuring margins in domestic chemical companies.
Steel – Import Risk Lingers
While US tariffs remain unchanged at 25%, a diversion of Chinese steel could intensify pricing pressure in India. The government's move to impose a 12% safeguard duty on flat steel may provide limited cushion.
Auto Ancillaries – Tariff Advantage Offset By Weak US Outlook
Tariff pass-through mechanisms in export contracts could protect margins, but Ind-Ra warned of weaker US vehicle demand if original equipment manufacturers pass costs to consumers. The US accounted for 27% of India's auto component exports in fiscal 2024.
Expectations From RBI
Ind-Ra said that monetary and fiscal policies may need to remain supportive of growth, as global volatility and tariff uncertainty keep private investment subdued. The Reserve Bank of India has already front-loaded easing, cutting rates in February and infusing liquidity. But with risks to its earlier fiscal 2026 GDP forecast of 6.6%, more support could be on the table.
The agency plans to reassess its 10 basis point drag estimate on fiscal 2026 GDP once greater clarity emerges on tariff outcomes and supply shifts.
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