Crisil Report: 25 percent US tariff to hurt Indian exports

A new report by Crisil Ratings, an Indian ratings agency, warns that a new 25 percent tariff on Indian imports to the U.S. could significantly hurt key export sectors. The tariff, which goes into effect on August 27, 2025, is set to make exports from industries like home textiles, carpets, and readymade garments commercially unviable. The report highlights that the tariff's impact will depend on each sector's reliance on the U.S. market, their ability to pass on costs to consumers, and their competitive position against other countries.

The US is a major market for India, accounting for roughly 20 percent of its merchandise exports and 2 percent of its GDP. The tariff will make Indian goods more expensive than those from competitors in countries like China and Vietnam, eroding India's market advantage. Sectors that are highly dependent on US demand, such as home textiles and carpets, are expected to see the most severe impact. These industries send 70-75 percent and 65-70 percent of their exports to the US, respectively, and are likely to face steep declines in both sales volumes and profits. Similarly, the readymade garment (RMG) sector, which relies on the US for 10-15 percent of its revenue, will lose out to suppliers from China and Vietnam.

Beyond these immediate effects, the report also warns of "second-order effects." These include a potential slowdown in US demand for other goods and the possibility of other countries diverting their exports to India, which could hurt domestic producers. While the outlook is challenging, the report notes that the blow could be softened by factors such as strong corporate balance sheets, potential government intervention, and new trade agreements with other nations.

Crisil Ratings will continue to monitor the situation and adjust its credit ratings as needed, noting that any future US-India trade deal could quickly change the outlook.