How Trump’s 50% Tariff on Indian Goods Could Rewire Global Supply Chains—and What It Means for Indian Stocks

In a clear sign of displeasure over India’s growing trade ties with Russia—particularly its continued imports of Russian oil—US President Donald Trump has imposed a steep 50% tariff on several Indian exports. The move marks a sharp shift in trade policy and carries the potential to disrupt global supply chains, with possible ripple effects on the valuation of Indian companies, especially those that rely heavily on the US market.

Sectoral Impact of 50% Tariff

Here’s how the tariff will impact different Indian sectors:

Textile and Apparel Export Displacement

India’s textile and apparel exports to the United States totalled approximately $10.94 billion in FY24–25, with Tiruppur in Tamil Nadu contributing around $4.79 billion. The newly imposed 50% tariff, an additional 25% on top of existing duties, has pushed effective rates to as high as 63.9% for key categories such as knitted garments, severely eroding India’s cost advantage. In contrast, Vietnam and Bangladesh continue to benefit from preferential trade programmes, facing average US duties of just 8.5% and 7.4% respectively.

As a result, US buyers are diverting orders to these lower-cost markets. Tiruppur’s 600,000-worker ecosystem is facing halted production and operational distress, with Micro, Small & Medium Enterprises (MSMEs) particularly vulnerable. Indian-listed textile firms such as KPR Mill and Page Industries are reporting margin compression, shipment delays and order cancellations. Meanwhile, Vietnam’s textile exports to the US surged 18.5% year-on-year in H1 2025, reaching $8.54 billion, while Bangladesh also posted strong growth. The Federation of Indian Export Organisations (FIEO) has called for urgent government intervention to support liquidity and competitiveness amid this disruption.

Jewellery and Diamond Processing Shift

India exported approximately $9.95 billion worth of gems and jewellery to the United States in FY23–24, accounting for nearly one-third of its global gem and jewellery (G&J) exports. With rising tariffs, now totalling an effective duty burden of 52.1% due to reciprocal and penalty levies, Surat, which processes around 90% of the world’s diamonds, is witnessing widespread order halts, layoffs and factory closures, impacting nearly 300,000 workers. In contrast, Mexico and Thailand are gaining traction. Mexico’s jewellery exports to the US have risen, supported by the North America Free Trade Agreement (NAFTA)/The United States-Mexico-Canada Agreement (USMCA) duty exemptions, while Thailand’s polished gem exports surged 12.74% year-on-year during January–May 2025, boosted by pre-tariff inventory stocking.

Seafood Export Losses and Ecuador’s Competitive Surge

India’s seafood exports to the United States reached $2.71 billion in FY24–25, with shrimp contributing 69.46% of total export value and 43.67% of volume, underscoring its dominance in the trade mix. However, the recent tariff escalation, comprising a 25% base duty plus an additional 25% penalty, totalling 50%, has significantly eroded India’s competitiveness in the US market.

In contrast, Ecuador, benefiting from a trade pact that limits duties to 15%, recorded a 17.5% year-on-year increase in shrimp exports in Q2 2025, capturing diverted demand. Indian exporters have flagged ₹600 crore in stockpile losses and warned of cascading distress for shrimp farmers amid falling procurement prices and cancelled orders.

While concerns persist over earnings pressure, Avanti Feeds defied expectations with Q3 FY25–26 revenue of ₹1,365.77 crore, marking 8.98% year-on-year growth, contrary to projections of a 20–30% decline. The tariff shock is reshaping market share dynamics and fuelling urgent calls for trade relief and domestic support.

Auto Component Sector’s Margin Squeeze

India exported approximately $7.35 billion worth of auto components to North America in FY24–25, with the United States accounting for the bulk of this trade. Following the imposition of a 50% tariff on select Indian auto parts in August 2025, effective duties now exceed 45%, making Indian components 28–32% more expensive than their Chinese counterparts.

Indian firms such as Bharat Forge and Sundram Fasteners are facing renegotiations, deferred shipments, and are exploring offshore manufacturing to mitigate losses. According to GTRI, India’s auto component exports to the US are projected to decline by 22% in FY25–26, driven by demand compression and pricing disadvantages. This has led listed Indian suppliers to revise earnings guidance downward, citing volume loss, margin pressure, and increased freight costs.

Ceramics and Handicrafts Losing Ground

India’s handicraft exports to the United States were valued at approximately $1.6 billion in FY24–25, while ceramic exports stood at a more modest $261 million. Following the imposition of 50% tariffs on Indian goods in August 2025, US buyers have begun shifting to alternative suppliers such as Turkey and Vietnam. Exporters in India’s Morbi and Jaipur clusters are reporting widespread delays and cancellations, with Morbi experiencing over 25% order losses and Jaipur’s handicraft sector witnessing up to 50% shipment declines.

Chemical and Leather Goods Facing Mexican and EU Competition

India’s chemical and leather goods exports to the United States exceeded $3.2 billion in FY24–25. Leather exports alone reached $5.7 billion, with the US as a key destination, while chemical exports to the US were valued at $4.75 billion. Following the imposition of 50% tariffs on Indian goods effective August 27, 2025, competitors such as Mexico and EU producers have gained market share. In contrast, Germany’s chemical exports to the US are projected to decline, not surge, due to a new 15% US tariff on EU chemical imports.

Indian exporters, particularly in Kanpur and Chennai, are facing cost disadvantages of 25–30%, driven by tariff-induced price hikes and freight inflation. Listed firms such as SRF Ltd and Bata India are experiencing margin pressure. Analysts expect 10–18% earnings before interest, taxes, depreciation, and amortisation (EBITDA) compression for firms with high US exposure, especially in leather and speciality chemicals.

Conclusion

The doubling of US tariffs to 50% on many Indian goods is set to reshape global supply chains by diverting trade flows away from India. Export-centric regions and industries in India are particularly vulnerable, while companies dependent on domestic demand may fare better. The stock market has already shown signs of strain, with investor sentiment shaken and earnings forecasts trimmed. Recovery for Indian equities may depend on how successfully India can diversify markets, reform its trade policies, and reinforce domestic economic momentum.

References:

Chemical & Engineering News
Chemicalmarket
Goldmine Advertising
The Times of India
brgbuildingsolutions
The Financial Express
Mathrubhumi
TaxGuru
The Economic Times
ACMA
The Business Standard
Onmanorama
Investing