How US tariffs will hurt Indian diamond, garment, carpet exporters

Indian exporters are bracing for significant earnings hit following the United States’ decision to impose a steep 50 per cent tariff on imports from India, according to a report by Crisil Ratings.

The new tariff regime, which includes a 25% reciprocal tariff already in effect and an additional 25% penalty starting August 27, 2025, is expected to severely impact key sectors such as diamonds, shrimp, home textiles, carpets, and ready-made garments.

The move comes as a penalty for India’s continued crude oil imports from Russia, and it places Indian exporters at a disadvantage compared to many Asian peers, except China.

Major sectors at risk

Diamonds:

The US accounts for 25% of revenue for India’s diamond polishing sector. With demand for natural diamonds already sluggish and rising interest in lab-grown alternatives, the additional tariffs are expected to sharply reduce revenue and squeeze margins further.

Shrimp:

With 48% of Indian shrimp exports heading to the US, this sector is expected to be among the hardest hit. Export volumes are likely to fall sharply as Indian products become the most heavily taxed in the US market.

Home textiles & carpets:

These export-heavy industries (with 60-75% of sales tied to foreign markets) will face substantial revenue and profit declines. The US is the primary buyer, accounting for 60% of home textile and 50% of carpet exports.

Ready-made garments (RMG):

While the sector has lower US exposure (10-15% of revenue), the tariffs will make Indian garments uncompetitive compared to those from Vietnam and China.

Agrochemicals & capital goods:

Both sectors will face challenges due to US reliance on Chinese suppliers and stiff competition from countries like Mexico. With 11-12% of agrochemical exports and a portion of capital goods heading to the US, growth in these sectors could stall.

Broader economic impact

The US accounted for 20% of India’s total merchandise exports last fiscal, contributing 2% to India’s GDP. The report also highlights second-order risks such as reduced US demand amid economic stagnation, and shifting global trade flows due to uneven tariffs.

Mitigating factors

Crisil notes that strong corporate balance sheets, government support, and potential new trade agreements with other countries may cushion the blow to some extent. However, the overall impact is expected to be significant, especially for sectors with high dependence on the US market.

With Inputs from ANI

India