US Tariffs to Mostly Impact MSMEs in India's Textile, Diamond, and Chemical Sectors: Report

US tariffs are set to hit India's micro, small, and medium enterprises (MSMEs) hard, which make up about 45% of the country's total exports. According to a report by Crisil Intelligence, the textile, diamond, and chemical sectors will be the most impacted.

The U.S. currently applies a 25% tax on the value of Indian goods. As per news reports, an extra 25% tariff will be added on August 27, raising the total tariff to 50%. This increase is expected to significantly affect several sectors in India. 

Sector-Wise Challenges

India's exports to the US will be hit hard by the new tariffs, especially in the textile, gems and jewellery, and chemical sectors. These industries make up 25% of India's total exports to the US. The gems and jewellery industry in Surat, which is a major hub for diamond exports, will be particularly impacted. Diamonds alone account for more than half of the sector's exports.

Additionally, the chemical industry, where MSMEs hold a 40% market share, will face increased pressure. This is because Indian chemical companies will have a harder time competing with Japan and South Korea, which benefit from lower tariffs. 

According to the report, small and medium-sized businesses (MSMEs) will be hit the hardest by the tariffs, as they make up over 70% of these affected sectors.

Comparative Disadvantage in Global Trade

As per the report, Ready-made garments from India will likely be less competitive in the U.S. market. This is because countries like Bangladesh and Vietnam have lower tariffs, giving them an advantage. On the other hand, steel tariffs are projected to have minimal effect on MSMEs, as these units mainly produce re-rolled and long products, while the US imports largely consist of flat products.

Read More: Trump Doubles US Tariffs on India to 50%; 21-Day Window for Talks Opens!

Conclusion 

The US tariff hike will pressure Indian MSMEs, especially in textiles, diamonds, and chemicals. With rivals like Vietnam, Bangladesh, Japan, and South Korea facing lower duties, India risks losing export competitiveness in key global markets.

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