India’s export engine, valued at $434 billion, is bracing for a major setback as US President Donald Trump’s new 50% tariffs kick in. The move stems from an additional 25% levy imposed on Indian shipments in response to New Delhi’s Russian oil purchases, threatening to squeeze India’s most lucrative overseas market. The industrial product manufacturing sector in India is likely to take the blow.
US – India’s Single Largest Export Market at Risk
The US accounts for nearly 20% of India’s total exports – about $86.5 billion worth of goods in FY25. With the higher tariff wall in place, analysts warn that India’s appeal as an emerging manufacturing hub could diminish compared to regional peers.
- US demand contributes nearly 2% of India’s GDP.
- Goldman Sachs estimates the tariffs could shave 0.6 percentage points off India’s growth.
- Growth forecasts may slide to 6% from 7% due to falling export demand.
Shilan Shah of Capital Economics notes that the extra 25% tariff is “large enough to have a material impact.”
Industrial Product Manufacturing & Engineering Goods in the Crosshairs
Engineering goods, spanning auto parts, power equipment, and industrial machinery, form India’s biggest export basket to the US, worth nearly $19.16 billion in FY25. But with steel already facing 50% sectoral tariffs, the broader category is now staring at steep declines.
- Engineering exports hit a record $116.67 billion in FY25.
- These account for 26.6% of total merchandise exports.
- North America alone absorbs over 20% of engineering exports.
However, Indian exporters still feel vulnerable. In March 2025, exports of iron, steel, copper products, and heavy machinery saw a decline.
What’s at Stake for India’s Economy
India’s industrial product manufacturing sector and merchandise exports have shown resilience in a tough global climate, posting a modest rise in June 2025 on the back of engineering goods. But Trump’s tariffs risk reversing these gains.
Over the past decade, India’s engineering exports have steadily grown, crossing $100 billion milestones multiple times despite dips. The new US policy, however, presents a sharper, more immediate threat than previous cyclical slowdowns.
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Sources: Compiled and adapted from reports published by The Press Information Bureau on 27 July, 2025; EEPC India Export Statistics Report on March 2025; CNBC on August 7, 2025
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