US plays tariff 'Trump' card, Gujarat’s exports stare at crisis

Yagnesh Bharat Mehta, Niyati Parikh & Parag Dave / TNN / Updated: Apr 4, 2025, 10:19 IST

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Gujarat faces significant challenges as the US imposes a 27% tariff on Indian exports, affecting textiles, chemicals, and diamonds. However, there is relief for the pharmaceuticals and IT sectors. Solar panels may face short-term impacts but could benefit long-term. The diamond industry remains uncertain, hoping for positive developments before further tariff increases.

US plays tariff 'Trump' card, Gujarat’s exports stare at crisis

AHMEDABAD/SURAT: With the US imposing 27% tariffs on Indian exports, Gujarat �?the country's manufacturing powerhouse �?is likely to face some tough times. Industries such as textiles, chemicals, and specialty chemicals, as well as diamond cutting and polishing, are expected to suffer grave impacts. However, the exemption for pharmaceuticals and semiconductors has allowed manufacturers to breathe easy.
Chemical Exports in Jeopardy
As India's chemical hub, Gujarat fears a major disruption in exports to the US, with buyers unwilling to absorb the sharp 27% tariff hike. The impact will be severe on dyes, intermediates, and specialty chemicals.
"Exporters will struggle to compete as cost pressures mount, even with the depreciating rupee offering some cushion," said Ankit Patel, chairman of Chemexcil North Region. "No player can absorb such a steep cost increase overnight. While indirect exports via markets like Turkey may continue, direct shipments to the US will take a hit, especially in the first quarter."

A significant 15% of India's annual chemical exports to the US are already en route by sea, with shipments taking 40-50 days. "Once they reach US ports, the new tariffs will apply, creating uncertainty. Will buyers accept them, renegotiate, or send them back? The industry is bracing for immediate disruptions," Patel added.
Textile Sector Braces For Shocks
The effective tariff burden on the textile sector will be near 36%, which includes the existing 8-8.5% import duties. The orders have already taken a hit. Manufacturers fear an immediate decline in production activity as retailers rethink sourcing strategies.
"Turkey, Mexico, and Brazil will benefit from tariffs lower than India, disrupting supply chains and forcing a shift in sourcing markets. This will lead to a reduction in order volumes for Indian manufacturers. While bilateral trade negotiations are in progress, industry players see no immediate relief, with the next two quarters expected to be challenging," said Chintan Thaker, chairman, Assocham Gujarat State Council.
The United States remains the largest buyer of Indian textiles. In 2023-24, India's textile exports were $36 billion, of which the US accounted for nearly 28%—or $10 billion.
Despite the hurdles, some experts also see a long-term opportunity. "While buyers may reassess sourcing strategies in the near term, India's comparatively lower tariff against competitors like Vietnam, Bangladesh, and China positions it favourably in the long run," said Ronak Chiripal, promoter Chiripal Group. India could emerge as a preferred sourcing destination due to its cost advantage and strong manufacturing base, he added.
No Direct Impact On IT & ITes Sectors
India's IT and IT-enabled services (ITes) sector has been spared from the tariff hike, yet industry stakeholders maintain vigilance regarding wider challenges. The US, contributing 54% of India's $205 billion software service exports, is experiencing changes due to artificial intelligence advancements and economic instability, potentially affecting future business opportunities.
"This is a significant attempt by the US to balance its trade, and while IT services are exempt, the evolving landscape—especially with AI reshaping business models—demands close monitoring of the sector," said Tejinder Oberoi, chairperson of Gujarat, Indo American Chamber of Commerce.
Industry players also indicate that with Europe accounting for 31% of IT exports, diversification may offer some cushion, but given the sector's deep ties with the US market, a prolonged slowdown in the US could affect outsourcing demand for India.
Long-Term Gains For Solar Sector
Gujarat's solar manufacturers expect an immediate impact from the US tariff. However, they remain optimistic, as China faces an even steeper tariff hike, potentially making Indian solar panels more competitive in the longer run.
"Indian solar panels previously attracted zero duty. It will have a short-term impact due to contract adjustments. However, with the US imposing a 34% tariff on Chinese goods—raising the total duty on Chinese solar panels from 50% to 84%—Indian manufacturers gain a significant advantage," said Kunj Shah, chairman of the Renewable Energy Committee at Assocham Gujarat.
Surat's Diamond Sector Likely To Be Hit Hard
The announcement of a reciprocal tariff of 26% by the US is likely to severely affect gems and jewellery exports from India. Industry leaders say they are monitoring the situation until April 9, when the announced tariff comes into force. A 10% tariff will come into effect from April 5. Cut and polished diamonds earlier had no tariffs.
The industry, being the largest cut and polished diamond manufacturer, is hoping for a positive development between the two countries before the new tariffs come into force.
In a statement, the Gems & Jewellery Export Promotion Council (GJEPC) said, "The Indian gems and jewellery industry, like the rest of the world, is trying to analyse the evolving global economic landscape due to the reciprocal tariff announcement by the US. GJEPC understands the US administration's intent to address trade and tariff imbalances through reciprocal tariffs; however, it urges the US to uphold the spirit of the longstanding trade partnership between India and the United States, which has been built on mutual respect and shared economic interests."
Top diamond manufacturers and leading exporters are unsure about their plans of action and are worried. "The industry was showing signs of improvement after almost two years. With the US being the biggest market for India, the tariff increase will have a serious impact," a manufacturer said.

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