US Tariff Slap: Indian Exporters Face Margin Crunch
Indian exporters now face a major shake-up. With a 50% tariff—25% reciprocal and an additional 25% penalty—set to kick in on August 27, 2025, sectors with high exposure to the US market will likely see a dent in revenues. This decision follows an executive order by US President Donald Trump, in response to India’s crude oil imports from Russia. The new tariff adds to the most-favoured-nation (MFN) duties already in place (ranging from 0-14%). Crisil Ratings highlighted that sectors like diamond polishing, shrimp, home textiles, carpets, garments, and solar panels face the brunt of the new levy. With the US accounting for 20% of India’s merchandise exports, the hit could extend up to 2% of India’s GDP.
Tariff Trouble Hits Diamond And Shrimp Sectors Hard
Crisil’s analysis revealed a sharp decline ahead for diamond polishers, who rely on the US for 25% of their revenue. The double tariff, tepid demand for natural diamonds, and rising interest in lab-grown alternatives compound the pain. The sector’s already thin margins face further pressure, as US retailers resist sharing the tariff load. Meanwhile, shrimp exporters—with 48% revenue exposure to the US—are now the most taxed globally. Crisil warned, “This could drag down export volume, even as players look for alternative markets to support their exports.” Stretching working capital cycles, slow inventory turnover, and delayed customer payments will likely amplify liquidity pressure for these businesses.
The diamond industry faces severe strain as US tariffs double, hitting 25% of revenue sources. Weak demand for natural diamonds and rising competition from lab-grown alternatives worsen margins. With retailers unwilling to share costs, liquidity tightens due to longer working capital cycles, sluggish inventory turnover, and delayed payments.
Home Textiles And Carpets Feel the Floor Drop
Export-heavy sectors like home textiles and carpets also stand to lose. Home textiles derive 70–75% of their revenue from exports, with the US accounting for 60% of that. Carpets are in a similar boat, with 65–70% of sales from exports and half going to the US. Crisil noted that the reciprocal tariff will lead to a material decline in revenue and profits, despite India enjoying some competitive edge over China. The high US dependency means players will likely absorb tariff costs, tightening margins. The report added, “Operating margins may decline as fixed-cost coverage erodes, and demand wanes under the price pressure.”
Other Export Sectors Brace for Manageable Impact
Not all is doom and gloom—sectors such as ready-made garments (RMG), agrochemicals, capital goods, and specialty chemicals will feel a lighter blow. These industries have moderate exposure to the US (5–20% of total revenue) and less severe tariff disadvantages. Crisil believes companies in these segments might partially pass on costs to customers, softening the margin impact. But with global trade dynamics shifting, Indian investors should stay alert. Crisil cautioned that “a potential slowdown in US demand and disparate tariffs across nations could alter trade patterns globally,” urging continuous monitoring of trade flows and policy shifts.
Mitigating Moves Could Soften the Tariff Shock
Despite the tariff turbulence, Crisil pointed to possible silver linings. Strong corporate balance sheets, potential bilateral trade pacts, and Indian government support could help limit the credit impact. “That said, strong corporate balance sheets, potential bilateral trade agreements with other countries and the possibility of support from the Indian government for the impacted sectors could mitigate the credit impact to some extent,” said the rating agency. Indian exporters may also diversify markets, cut costs, or explore new value-added offerings to ride out the storm. For investors, export-heavy stock portfolios may need close review in the coming quarters.
Key Takeaways For Indian Investors
- New US Tariff: 25% reciprocal + 25% penalty = 50% total
- Effective Date: August 27, 2025
- High-Risk Sectors: Diamonds, shrimp, home textiles, carpets
- Revenue Exposure to US:
- Shrimp: 48%
- Diamonds: 25%
- Home Textiles: 60% of exports
- Carpets: 50% of exports
- Lower-Risk Sectors: Garments, chemicals, capital goods.
- Potential Buffers: Govt support, trade deals, diversification.
- Investor Cue: Watch for margin hits and shifting trade dynamics.
(With Inputs From ANI)
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Aishwarya is a journalism graduate with over three years of experience thriving in the buzzing corporate media world. She’s got a knack for decoding business news, tracking the twists and turns of the stock market, covering the masala of the entertainment world, and sometimes her stories come with just the right sprinkle of political commentary. She has worked with several organizations, interned at ZEE and gained professional skills at TV9 and News24, And now is learning and writing at NewsX, she’s no stranger to the newsroom hustle. Her storytelling style is fast-paced, creative, and perfectly tailored to connect with both the platform and its audience. Moto: Approaching every story from the reader’s point of view, backing up her insights with solid facts.
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