India looks to substitute Chinese imports with US goods as reciprocal tariffs loom

India’s response to US trade pressures

The advisory follows US President Donald Trump’s criticism of India’s high tariffs on automobiles and agricultural products.

In response, the Indian government is considering lowering some tariffs and expanding market access for US goods to prevent broader American trade restrictions, which are reshaping global commerce and straining relations with key economies like China and the European Union.

Commerce minister calls for strategic approach

Commerce Minister Piyush Goyal reaffirmed the government’s commitment to safeguarding exporters while pursuing a multi-pronged trade strategy.

Addressing concerns over the upcoming tariffs, he urged exporters to move beyond a “protectionist mindset” and adopt a forward-thinking approach.

Impact on steel and aluminium exports

During a stakeholder meeting on Thursday, officials assessed the challenges and opportunities posed by the US tariffs.

Steel and aluminium exporters highlighted that Indian exports worth $5 billion have already been impacted by Trump’s 25 percent tariff on these metals, which took effect this week.

MSME sector faces challenges

“The MSME sector is particularly concerned, as a substantial portion of this $5 billion export volume comes from small and medium enterprises,” said Pankaj Chadha, Chairman of the Engineering Export Promotion Council (EEPC) India.

He noted that iron and steel products under Chapter 73 account for $3 billion of these exports, largely driven by MSMEs. Additionally, around $1 billion worth of shipments currently in transit to the US—taking about 60 days to arrive—will now be subjected to the new tariffs.

Industry proposals for market access

Industry representatives proposed expanding market access for US goods in textiles, electronics, gems and jewellery, and carpets.

While the textile sector expressed willingness to grant zero-duty access to US products, the gems and jewellery industry sought a reduction in the 5 percent duty on cut and polished diamonds to 2.5 percent instead of full elimination.

Opportunities amid tariff disruptions

Some exporters noted that India is already seeing increased orders as US buyers shift away from traditional suppliers like China, Mexico, and Canada due to higher tariffs.

“Except for certain sectors like agriculture, these tariffs might actually create opportunities for India due to our lower production costs. Ultimately, competitiveness will be key, even if tariff concessions are extended to US goods,” remarked one meeting participant.

WTO warns of global trade slowdown

Meanwhile, the World Trade Organization (WTO) has warned that escalating trade policy uncertainty and potential new tariffs could dampen global trade in the medium term.

While the merchandise trade barometer index currently stands at 102.8, indicating above-trend growth, the WTO cautioned that businesses and consumers may be accelerating imports ahead of expected tariff hikes, potentially leading to a slowdown later in the year.