KNOWLEDGE

Centre for Advanced Trade Research

Trade Promotion

PAPER
Council of India

Tariffs & beyond:

Future of
India-US
Economic Ties

APR
2025
Tariffs & beyond: Future of India-US
Economic ties

A report by

9, Scindia House
nd
2 Floor, Connaught Circus
New Delhi – 110001, India
www.tpci.in

1
© 2025 Trade Promotion Council of India (TPCI). All rights reserved.

Project Head:

Virat Bahri, Joint Director, Trade Promotion Council of India

Project team:

Nehchal Singh, Research Associate, Trade Promotion Council of India

Ifra Dilshad Khan, Research Assistant, Trade Promotion Council of India

Cover Design: Prakash Shetty, Sr Art Director, Trade Promotion Council of India

Acknowledgements

Dr Arpita Mukherjee, Professor, ICRIER; Ajay Srivastava, Founder, Global Trade

Research Initiative; Prof Manoj Pant, Visiting Professor, Shiv Nadar University; Dr.
Nilanjan Banik, Program Chair at Mahindra University; Dr Javeria Maryam,
Research Consultant

This research study is the intellectual property of the Trade Promotion Council of
India (TPCI). No part of this publication may be reproduced, distributed, transmitted,
stored, or adapted in any form or by any means—electronic, mechanical,
photocopying, recording, or otherwise—without the prior written permission of TPCI.

The information, data, and analysis provided in this report are for informational
purposes only and are based on sources deemed reliable. While every effort has
been made to ensure accuracy, TPCI does not assume responsibility for any errors,
omissions, or consequences arising from the use of this material. The views and
opinions expressed in the report are those of the authors and do not necessarily
reflect the official policy or position of TPCI.

Any reference or citation of this study must credit the Trade Promotion Council of
India (TPCI) as the source. For permissions, licensing requests, or further
information, please contact:

Trade Promotion Council of India (TPCI)

9. Scindia House
2nd Floor, Connaught Circus, New Delhi
Email: researchdesk1@tpci.in
Ph: 91-11- 40727272
Website: www.tpci.in

Unauthorized use or reproduction of this report in whole or in part may result in legal
action.

2
Contents

Chapter 1: The evolution of tariffs 4

Chapter 2: US tariffs: Global economic impact 7

Chapter 3: Comparative Analysis of 14

US-India Tariffs and Reciprocity Impacts

Chapter 4: India’s Trade Prospects in North 33

America: Opportunities amid US tariff shifts

3
 Chapter 1: The Evolution of Tariffs

1.1 Introduction

Tariffs have played a significant role in shaping global trade policies for centuries. Initially used as a
primary source of government revenue, they evolved into strategic tools for protecting domestic
industries and regulating trade balances. The establishment of multilateral trade agreements has
significantly altered the way tariffs are applied, particularly with the formation of the General
Agreement on Tariffs and Trade (GATT) in 1947 and the World Trade Organization (WTO) in 1995.
However, recent developments, including the US administration's push for reciprocal tariffs, have
challenged the existing framework, raising concerns about the stability of international trade relations.

A tariff is a tax imposed on imported goods to regulate trade, protect domestic industries, and
generate revenue. By increasing the cost of foreign products, tariffs encourage consumers to prefer
locally produced goods. Governments also use tariffs as a diplomatic and economic tool to influence
trade relations and national policies.

There are several types of tariffs, each serving distinct economic and policy objectives:

● Ad Valorem Tariff – This tariff is calculated as a percentage of the good’s value. For instance,
if a product is valued at US$ 100 and an ad valorem tariff of 10% is applied, the importer must
pay US$ 10. If the value increases to US$ 150, the tariff rises to US$ 15.
● Specific Tariff – A fixed charge is applied to each unit of an imported good, irrespective of its
value. For example, if a tariff of US$ 0.23 per pound is levied on fish imports, the importer
pays US$ 0.23 for each pound brought into the country.
● Compound Tariff – This tariff combines both ad valorem and specific tariff elements, applying
whichever results in higher revenue. For example, imported chocolate may be subject to
either a US$ 2-per-pound tariff or a 17% tariff on its value, depending on which yields a greater
amount.
● Mixed Tariff – This tariff applies both ad valorem and specific components simultaneously.
For instance, chocolate imports may be taxed at US$ 10 per pound plus an additional 3% of
their value.

Governments strategically choose the type of tariff to align with their economic and trade policy goals,
ensuring they protect domestic markets while maintaining international competitiveness.

1.2 Tariff Regulation: Pre-WTO and Post-WTO

Recognizing the economic damage caused by trade protectionism before World War II, 23 countries,
including the United States, established GATT (General Agreement on Trade and Tariffs) in 1947. This
initiative facilitated multilateral negotiations to liberalize trade and reduce tariff barriers. Over time,
GATT members progressively lowered their import tariffs and quotas, laying the groundwork for a
structured, rules-based international trade system.

With the creation of the World Trade Organisation (WTO) in 1995, tariff regulations became more
stringent. WTO members committed to tariff binding, a mechanism that sets maximum tariff limits
(bound tariffs) that countries cannot exceed without renegotiation. These commitments, detailed in

4
each country's Schedule of Concessions, brought greater predictability and fairness to global trade.
WTO’s enforcement mechanisms ensure that countries comply with their tariff commitments,
allowing for dispute resolution in cases of violations.

Despite WTO regulations, the US has increasingly questioned the fairness of existing tariff structures.
The Trump administration has argued that the US maintains relatively low tariffs while other countries
impose higher duties and trade barriers on American goods. According to the administration, this
disparity contributes to a US$ 1 trillion trade deficit, harming American industries and workers.

To address this, the US government introduced the Reciprocal Tariff Plan on February 13, enabling
tariff increases on countries with which it has a trade deficit. The first round of these tariffs is set to
take effect in April, marking a shift away from WTO principles toward a more unilateral approach to
trade regulation.

The US plan to impose reciprocal tariffs contradicts several key WTO rules:

● Most-Favored Nation (MFN) Principle: WTO mandates that tariffs must be applied equally to
all trading partners. Imposing country-specific tariffs based on trade deficits violates this
principle.
● Exceeding Bound Tariff Rates: The US has committed to specific tariff ceilings under the WTO
framework. Increasing tariffs beyond these limits breaches these commitments.
● Unilateral Actions: WTO rules prohibit countries from imposing unilateral tariff hikes outside
of the dispute resolution process.
● Developing Country Exemptions: Many developing nations are permitted higher tariff
protections under WTO rules. The US attempt to override these provisions challenges
established trade policies.

1.3 Why some countries maintain higher tariffs

Many developing countries, including India, retain higher import duties to support their economies.
These tariffs help shield emerging industries from foreign competition, promote self-sufficiency, and
regulate trade imbalances. In contrast, developed nations like the US generally have lower tariffs due
to stronger industrial bases and greater access to global markets.

When the WTO was established, developing nations were allowed to maintain higher tariffs in
exchange for commitments in areas such as intellectual property rights, services, and agricultural
trade. However, developing countries argue that these commitments have disproportionately
benefited wealthier economies, limiting their ability to industrialize.

The US move toward reciprocal tariffs challenges the WTO’s Special and Differential Treatment
(S&DT) provisions, which grant developing countries flexibility in trade policies. Imposing uniform
tariffs without considering a country’s economic status undermines these provisions and threatens
the balance in global trade.

Furthermore, unilateral actions by the US risk triggering retaliatory measures from affected countries.
This could escalate trade conflicts, weaken the WTO’s authority, and disrupt international supply
chains, ultimately impacting global economic stability.

5
 1.4 Are We Repeating History?
The Smoot-Hawley Tariff Act of 1930 serves as a cautionary tale for modern trade policies. Signed
into law during the Great Depression, this act aimed to protect American farmers and industries by
imposing high tariffs on over 20,000 imported goods. However, instead of revitalizing the US economy,
the policy triggered retaliatory tariffs from major trading partners, including Canada and European
nations. The resulting collapse in global trade worsened the economic downturn and is widely
regarded as a key factor that deepened and prolonged the Great Depression.
Key consequences of the Smoot-Hawley Tariff Act:

● Global Retaliation – Countries imposed countermeasures, leading to an overall decline in

trade.
● Supply Chain Disruptions – Increased costs and barriers hurt businesses reliant on imported
materials.
● Economic Decline – Rather than stimulating domestic production, reduced trade
contributed to rising unemployment and economic stagnation.

The lessons from Smoot-Hawley highlight the dangers of protectionist tariff policies. In today’s
interconnected global economy, similar aggressive tariff strategies could lead to unimaginable supply
chain disruptions, inflationary pressures, and weakened international relations.
1.5 Looking Ahead
For India, the second Trump administration presents both risks and opportunities. While previous US
tariffs on steel, aluminium, and tech products created hurdles for Indian exporters, a renewed push
for bilateral trade deals could open avenues for deeper economic engagement. However, the
indirect impact of US actions—whether through global supply chain disruptions or investment
shifts—will shape India’s trade strategy.
If US tariffs remain in place for an extended period, they could become the biggest tax hike since the
Clinton-era tax increases in the 1990s. This underscores the aggressive nature of Trump’s economic
nationalism and its potential global repercussions.
Given these developments, India must strategically navigate trade negotiations, strengthen domestic
industries, and capitalize on emerging global supply chain shifts.

6
 Chapter 2: US Tariffs: Global Economic Impacts
2.1 Key Tariff Measures under Trump 2.0
With President Trump back in the White House for a second term, US trade policy is once again taking
a protectionist turn. The return of "America First" economic policies has already begun reshaping
global trade flows, with renewed tariff measures, stricter trade agreements, and heightened scrutiny
of global supply chains. Key partners, including China, Mexico, Canada, the European Union, and even
allies like South Korea, are reassessing their trade strategies in response to Washington’s evolving
stance. Since February 2025, the United States has implemented a series of significant trade tariffs
under President Trump's administration, affecting major trading partners such as China, Canada, and
Mexico. These actions have prompted various retaliatory measures, leading to heightened global
trade tensions. Below is a detailed timeline of these developments:
Table 1: Trump’s trade war timeline 2.0
Date Country Category Description
America First Trade Policy Memorandum: The White House releases a
20-Jan-25 NA memorandum outlining trade priorities for the administration, directing
departments and agencies to complete studies by April 1, 2025.
Canada Tariffs on Canada, Mexico, and China: Trump issues executive orders and
01-Feb- China Fentanyl and a fact sheet announcing tariffs on Canada, Mexico, and China coming
25 Immigration February 4. The orders would also end duty-free de minimis treatment of
Mexico low-value packages from these countries.
Canada announces retaliation: Canada announces two rounds of tariffs,
Fentanyl and including those imposed immediately following the US tariffs, targeting US
1-Feb-25 Canada Immigration exports including orange juice, peanut butter, wine, spirits, beer, coffee,
appliances, apparel, footwear, motorcycles, cosmetics, and pulp and
Retaliation paper.
Tariffs on Mexico on hold: Mexico’s Sheinbaum posts on X that US tariffs
are on hold for one month after Mexico agrees to send more National
Fentanyl and
3-Feb-25 Mexico Guard members to the southwest border and the US agrees to work on
Immigration
reducing weapons shipments to Mexico. The White House confirmed in an
executive order.
Tariffs on Canada on hold: Canada’s Trudeau posts on X that the tariffs
Fentanyl and are on hold for 30 days, as Canada implements its plan to secure the
3-Feb-25 Canada
Immigration northern border to address fentanyl trafficking. The White House
confirmed in an executive order.
Tariffs on China go into effect, end of duty-free packages from China: The
Fentanyl and US imposes 10% tariffs on imports from China, as announced February 1.
4-Feb-25 China
Immigration The US also ends de minimis treatment of low-value packages from China
receiving zero tariffs.

China retaliates: China announces tariffs, export controls, and unreliable

Fentanyl and
entity designations, and threatens new antitrust investigations into Google
4-Feb-25 China Immigration
in response to US tariffs imposed on February 4. Chinese tariffs take effect
on February 10.
Retaliation
Duty-free packages from China restored: The US amends the February 1
Fentanyl and executive order to temporarily restore the duty-free treatment of low-
5-Feb-25 China
Immigration value shipments from China (Federal Register notice). De minimis
amendments for Canada and Mexico will arrive on March 2.

7
 Tariffs on steel and aluminium: Trump issued one proclamation imposing
25% import tariffs on steel and a separate proclamation imposing 25%
10-Feb- Steel and
World tariffs on aluminium as of March 12, 2025, adjusting the Section 232 tariffs
25 aluminium
on those metals first imposed in March 2018. (The aluminium
proclamation is dated February 11).
Reciprocal Trade and Tariffs Memorandum: The White House releases a
13-Feb- memorandum, fact sheet, and statement defining the problem and
World
25 outlining the Trump administration’s plan to counter nonreciprocal trading
arrangements.
America First Investment Policy Memorandum: The White House releases
a memorandum and fact sheet on the administration’s policy toward
21-Feb- China
inbound foreign direct investment, especially from adversaries such as
25
China, that includes “fast track” policy for investment from specified
World partners and allies.
Austria
Defending American Companies and Innovators From Overseas Extortion
Canada and Unfair Fines and Penalties Memorandum: The White House releases
EU a memorandum and fact sheet articulating concerns with foreign
21-Feb- France treatment of US digital companies, especially by the European Union, and
25 Italy requesting the US Trade Representative to re-examine any digital services
Spain taxes (DSTs) of Austria, France, Italy, Spain, Turkey, and the United
Turkey Kingdom under Section 301 of the Trade Act of 1974 and consider a formal
USMCA dispute against Canada.
UK
Copper imports as a national security threat: The White House issues a
fact sheet and executive order requesting the Department of Commerce
25-Feb-
World Copper conduct an investigation into whether imports of copper pose a threat to
25
US national security under Section 232 of the Trade Expansion Act of 1962.
(Federal Register notice).
Timber and lumber imports as a national security threat: The White
House issues an executive order requesting the Department of Commerce
conduct an investigation into whether imports of timber and lumber pose
1-Mar-25 World Lumber a threat to US national security under Section 232 of the Trade Expansion
Act of 1962. In a separate executive order, the White House direct the
Department of Interior and Department of Agriculture to issue new
regulatory guidance for expanded domestic timber production.
US tariffs go into effect on Canada: The White House issues a fact sheet
announcing that President Trump is ending the 30-day pause on the
Fentanyl and
4-Mar-25 Canada February 1 executive order by imposing 10% tariffs on imports of Canadian
Immigration
oil and energy products and 25% tariffs on the remainder of imports from
Canada.
US tariffs go into effect on Mexico: The White House issues a fact sheet
Fentanyl and announcing that President Trump is ending the 30-day pause on the
4-Mar-25 Mexico
Immigration February 1 executive order by imposing 25% tariffs on all imports from
Mexico.
Higher tariffs go into effect on China: The White House issues an
Fentanyl and
4-Mar-25 China executive order amending the executive order of February 1 by raising the
Immigration
new tariffs on all imports from China from 10% to 20%.
Canada retaliates on US farm exports and more: Canada announces plans
Fentanyl and
to retaliate by imposing 25% tariffs on C$155 billion worth of imported
Immigration
goods from the United States. Going into immediate effect are tariffs on
4-Mar-25 Canada
goods worth C$30 billion, including orange juice, peanut butter, wine,
Retaliation spirits, beer, coffee, appliances, apparel, footwear, motorcycles,
cosmetics, and certain pulp and paper products.

8
 China retaliates: Tariffs on US farm exports, export controls, sanctions,
Fentanyl and anti-dumping investigation, and more: In response to the additional US
Immigration tariffs of March 4, China announces new tariffs will go into effect on
March 10 on US farm exports, including soybeans, chicken, wheat, corn,
4-Mar-25 China and cotton products, as well as sorghum, pork, beef, seafood, fruits,
vegetables, and dairy products. China also announced an anti-dumping
Retaliation investigation into US optical fiber products, 10 US companies being added
to the unreliable entity list, 15 companies facing export controls, and a
ban on imports of Illumina's gene sequencers.
US exempts imports from Canada satisfying USMCA rules of origin
requirements: The White House issues a fact sheet and executive order
Fentanyl and
6-Mar-25 Canada amending the March 4 tariffs to exempt imports from Canada satisfying
Immigration
USMCA rules of origin requirements and to lower the tariff on potash to
10%.
US exempts imports from Mexico satisfying USMCA rules of origin
Fentanyl and requirements: The White House issues a fact sheet and executive order
6-Mar-25 Mexico
Immigration amending the March 4 tariffs to exempt imports from Mexico satisfying
USMCA rules of origin requirements and to lower tariff on potash to 10%.
Tariffs on steel and aluminium go into effect: US tariffs of 25% on imports
of steel, aluminium, and derivative products announced on February 10 go
into effect. Despite prior threats that Ontario, Canada would retaliate with
12-Mar- Steel and
World a 25% tax on energy exports to the US and Trump’s threat to counter-
25 aluminium
retaliate by doubling the US tariff on Canadian steel from 25 to 50%,
neither materialize by this point.

EU retaliates against US steel and aluminum tariffs: The European

Steel and Commission announces in a press release and fact sheet its two-part
aluminum retaliation for the US tariffs that went into effect on March 12. One part
12-Mar- Europea restores the EU’s “rebalancing” tariff packages (from 2018 and 2020) that
25 n Union will go into effect April 1, 2025. A second part will eventually impose
additional countermeasures on approximately €18 billion worth of US
Retaliation goods exports.

Steel and Canada retaliates against US steel and aluminium tariffs: Canada
aluminum announces plans to retaliate on March 13, 2025, by imposing 25% tariffs
12-Mar- on a list of US goods totaling C$29.8 billion, including C$12.6 billion worth
Canada
25 of steel products, C$3 billion worth of aluminium products, and other US
Retaliation goods worth C$14.2 billion, including tools, computers and servers, display
monitors, sport equipment, and cast-iron products.
Source: PIIE

Key Observations
● The data reflects a pattern of escalating trade tensions starting from January 2025.
● Canada's early retaliation suggests that US measures quickly triggered countermeasures from
major trade partners.
● The emphasis on fentanyl and immigration as justifications for tariffs reflects Trump's
domestic policy priorities aligning with international trade decisions.

9
2.2 Global economic repercussions:
The potential return of Trump to the US presidency raises significant concerns about the future of
global trade and economic stability. Aggressive tariff policies marked Trump’s first term, and a second
term could see a resurgence of these measures, with far-reaching consequences for the global
economy. Here’s an analysis of how tariffs could reshape the economic landscape:

1. Economic Growth and Inflation

The simulations, as modelled by the KITE Model from the Kiel Institute for the World Economy in chart
1, illustrate the short-run changes in real GDP (%) due to a 25% tariff on all US steel and aluminium
imports. The impact varies across countries, with Canada (-0.39%) and Mexico (-0.19%) experiencing
the most significant GDP declines, likely due to their strong trade dependence on the US for steel and
aluminium. Other economies, including Brazil (-0.04%), India (-0.03%), EU27 (-0.04%), and BRICS (-
0.02%), also see slight contractions. Japan (0.00%) shows no immediate change, indicating a neutral
short-term impact, whereas the United States (-0.04%) experiences a minor GDP decline, reflecting
potential economic disruptions despite its protectionist measures. The global real GDP also falls
slightly (-0.04%), signalling broader economic consequences. Overall, the data suggests that while the
US sees a limited short-term GDP effect, its major trading partners, especially Canada and Mexico,
face more significant economic slowdowns.

Chart 1: Short-run Changes in real GDP (in %)

Scenario: +25% tariffs on all US steel and aluminium imports

Source: Kiel Institute for the World Economy

10
Chart 2 illustrates the short-run changes in the price index due to a 25% tariff on all US steel and
aluminium imports, as modelled by the KITE Model from the Kiel Institute for the World Economy. The
United States experiences the highest price increase (+0.41%), indicating inflationary pressures as
import costs rise. In contrast, major trading partners like Canada (-0.28%), Brazil (-0.23%), and Mexico
(-0.13%) see price declines, likely due to trade diversion or reduced demand. Other economies,
including India (-0.07%), China (-0.06%), the EU27 (-0.07%), and BRICS (-0.09%), also experience slight
deflationary effects. The global price index rises slightly (+0.03%), suggesting moderate worldwide
spillover effects.

Chart 2: Short-run changes in price index (in %)

Scenario: +25% tariffs on all US steel and aluminium imports

Source: Kiel Institute for the World Economy

2. Sector-Specific Tariffs and Global Supply Chains: Trump’s tariff strategy is likely to target
specific sectors and products rather than imposing broad measures. For example:
● China: The US has already imposed a 10% tariff on Chinese imports, with the potential for
further escalation. An additional 40% blanket tariff could reduce China’s GDP growth by 1.2%
cumulatively from 2025 to 2028, though fiscal stimulus measures may partially offset this
impact1.

1
https://research-center.amundi.com/article/what-trump-20-means-economy-and-markets

11
 ● Europe: The EU, with a €200 billion trade surplus with the U.S., is bracing for potential tariffs.
A 10% tariff on EU exports could reduce the region’s growth by 0.25 percentage points in
2025, derailing its economic recovery. Germany, Ireland, and Italy are particularly exposed
due to their reliance on US exports2.
● Emerging Markets: Countries like Mexico and South Korea, which have significant trade
surpluses with the U.S., could face heightened volatility in their equity and currency markets.
China’s efforts to shift production chains to Asia and Latin America may mitigate some of the
tariff effects, but smaller economies with high debt levels will struggle to adapt.

3. Market Volatility and Investor Sentiment: Trump’s tariff policies are expected to fuel market
volatility, particularly in equity and fixed-income markets. Key drivers include:
● Equities: Sectors reliant on exports, such as autos and manufacturing, are at greater risk, while
service sectors like software, media, and telecoms are expected to remain resilient. US
financials may benefit from deregulation and persistently high bond yields.
● Fixed Income: Uncertainty around tariffs and inflation could keep US Treasury yields volatile,
with the 10-year yield potentially testing 4.8% before declining as growth slows. Emerging
market bonds, particularly hard currency debt, may offer attractive yields but remain
vulnerable to trade-related risks.
● Currencies: The US dollar (US$) is likely to strengthen in the short term due to its safe-haven
status and high carry versus other currencies. However, a prolonged appreciation could
exacerbate global trade imbalances and weigh on export-oriented economies.
4. Geopolitical and Trade Dynamics: Trump’s foreign policy agenda, driven by a desire to re-
industrialise the US and weaken competitors, could lead to further economic decoupling
between the US and China. Key developments include:
● US-China Relations: The relationship is expected to deteriorate, with tariffs and trade
restrictions dominating the agenda. However, both sides may seek to avoid a full-blown trade
war, creating opportunities for targeted negotiations.
● Europe: The EU may accelerate reforms and investments to reduce its dependence on the US
while also exploring new trade agreements with regions like Mercosur. However, consensus
among EU leaders on how to respond to US tariffs may take time, prolonging uncertainty.
● Emerging Markets: Countries like India and Mexico could benefit from diversification efforts,
but high valuations and tariff-related risks may limit their upside in the short term.

2
https://research-center.amundi.com/article/what-trump-20-means-economy-and-markets

12
 5. Long-Term Implications: The long-term impact of Trump’s tariffs will depend on the size,
timing, and sequence of the measures. Key risks include:
● Trade Wars: A full-blown trade war could lead to higher inflation, slower growth, and
increased geopolitical tensions, with significant spillover effects for global markets.
● Fiscal and Monetary Policy: Tariffs could complicate central bank policies, particularly in the
U.S., where the Federal Reserve may face pressure to raise rates if inflation persists.
Meanwhile, fiscal stimulus in China and Europe could help mitigate some of the negative
effects but may also increase public debt levels.
● Global Diversification: Over the long term, countries and companies are likely to accelerate
efforts to diversify supply chains and reduce reliance on the US market, potentially reshaping
global trade patterns.

2.3 Conclusion

A second Trump presidency could bring a return to the tariff-driven trade policies that defined his first
term, with significant implications for the global economy. From reduced economic growth and higher
inflation to heightened market volatility and geopolitical tensions, the impact of Trump’s tariffs would
be felt across borders and sectors. As the world prepares for the possibility of Trump 2.0, businesses,
investors, and policymakers must brace for a more fragmented and uncertain global trade
environment and think hard on contingency strategies.

13
 Chapter 3: Comparative Analysis of US-India Tariffs and
Reciprocity Impacts
3.1 India’s exports to the US
Since 1992, the United States has been a crucial export destination for India. In FY 1992, following
economic liberalisation, the US accounted for 16.4% of India’s total exports. By FY 2000, this share
peaked at 22.8%, driven by India’s increasing global integration and trade benefits. However, the 2008
financial crisis led to a slowdown in export growth, causing the US’s share to decline till FY 2010. The
US share in India’s total exports has been recovering since then.

From approximately US$ 20-25 billion in exports post-liberalisation, growing to US$ 77.5 billion in FY
2024, India’s exports to the US reflect a 10.3% CAGR over 30 years. This trend highlights key aspects:
while India has diversified its export markets, the US remains its most significant single-country
trade partner.

Table 3.1: India’s Export Trends to the US (FY07–FY24)

Parameter FY’07 FY’10 FY’18 FY’24

India’s Total Exports (US$ Mn) 126,414.05 178,751.43 303,526.16 437,072.03
India’s Total Exports to the US (US$ 18,863.47 19,535.49 47,878.48 77,515.03
Mn)
Share of US in India’s total exports 14.9% 10.9% 15.7% 17.7%
Source: Ministry of Commerce and Industry

3.2 Impact Analysis of Reciprocal Tariffs on India’s Exports to the US

To evaluate the potential impact of a reciprocal tariff on India’s exports, we will conduct a tariff
differential analysis which will identify products where India imposes higher tariffs compared to those
levied by the US on Indian goods. A review of the 2-digit HS code reveals that India applies higher
tariffs across nearly all product categories, with a few exceptions such as knitted or crocheted fabrics
(HS 60) and articles of apparel (HS 61, 62). As a result, most Indian exports face a significant risk if
reciprocal tariffs are enforced. From a purely data-driven perspective, we identified high-risk items by
selecting the top 90% of India's exports to the US, which narrowed the list down to 24 HS codes at
the 2-digit level.
To classify these items into high-risk, moderate-risk and other-at-risk categories, we applied the
following criteria.

Calculations

14
Note 1: The tariff differential is calculated as the ad valorem tariff imposed by India on US imports
minus the ad valorem tariff imposed by the US on Indian imports

Note 2: US share is the share of the US in India’s global exports.

3.1.1 High-Risk Products (Tariff Differential ≥ 30% & US Share > 10%)

This high-risk category accounts for US$ 5.14 billion in exports, making these products particularly
vulnerable to US reciprocal tariffs.

Table 3.2: High-Risk Export Products

Tariff
Exported Value
HS Code Commodity Differential US Share (%)
(US$ Mn)
(India > U.S.)

86 Vehicles (Other than Railway) & Parts 2,647.57 73 12.67

Preparations of Meat, Fish, Crustaceans,

16 585.34 47 80.64
Molluscs
3 Fish & Crustaceans, Molluscs 1,903.86 30 31.09
Total — 5,136.77 — —
Source: Ministry of Commerce and Industry, ITC Trade Map

3.1.2 Moderate-Risk Products (Tariff Differential ≥ 7% & US Share > 25%)

This moderate-risk category accounts for US$ 24.55 billion in exports, making these products
moderately vulnerable to US reciprocal tariffs.

Table 3.3: Moderate-Risk Export Products

Tariff
Exported Value
HS Code Commodity Differential US Share (%)
(US$ Mn)
(India > U.S.)

57 Carpets & Other Textile Floor Coverings 1,088.01 8 58.01

94 Furniture, Bedding, Mattresses, Lamps 1,100.85 10 45.55

Articles of Stone, Plaster, Cement,

68 864.19 10 41.69
Asbestos, Mica
30 Pharmaceutical Products 8,079.95 10 36.55

71 Natural or coloured pearls 9,948.50 11 30.28

73 Articles of Iron & Steel 2,793.57 10 28.11

42 Leather, Saddlery, Handbags 682.23 7 27.88
Total — 24,557.30 — —
Source: Ministry of Commerce and Industry, ITC Trade Map

3.1.3 Other-at-Risk Products (Tariff Differential < 7% OR US Share < 25%)

This low-risk category accounts for US$ 37 billion in exports, making these products relatively less
vulnerable to US reciprocal tariffs.

15
 Table 3.4: Other-at-Risk Export Products

Exported Value Tariff Differential

HS Code Commodity US Share (%)
(US$ Mn) (India > U.S.)
85 Electrical Machinery & Equipment 11,081.13 5 32.2
Nuclear Reactors, Boilers,
83 6,166.51 6 20.52
Machinery
40 Rubber & Articles Thereof 906.19 12 19.8

39 Plastic & Articles Thereof 1,446.29 8 19.59

38 Miscellaneous Chemical Products 1,275.37 6 19.39

Optical, Medical, & Precision
90 899.97 6 18.03
Instruments
88 Aircraft, Spacecraft, & Parts 500.83 3 15.44
Essential Oils, Perfumery,
33 424.08 18 14.31
Cosmetics
76 Aluminium & Articles Thereof 945.66 7 12.36

29 Organic Chemicals 2,408.30 5 11.86

27 Mineral Fuels, Oils, Waxes 5,832.94 3 6.66

72 Iron & Steel 475.57 9 4.01

- Total 37,081.89 - -
Source: ITC Trade Map, Authors Calculations

Despite being a growing and sizable market, India remains significantly underrepresented in US
exports compared to its share in India's exports. While the US accounts for nearly 18% of India's total
exports, India's share in US exports is considerably lower—just shy of 2% in 2024, according to ITC
Trade Map data. This disparity makes Indian exports more vulnerable to reciprocal tariffs in terms of
scale.

The true test lies in how competitive the US is in exporting products from India’s top 24 export
categories (90% of India’s exports to the US). To assess this, we can compare the Revealed
Comparative Advantage (RCA) of both India and the US in these HS codes to provide a clearer picture
of which industries require stronger tariff protection and where lower tariffs would have minimal
impact.

16
 Table 3.5: RCA of US & India Comparison in Select Products

HS Code Commodity RCA (India) RCA (US) Risk

3 Fish & Crustaceans, Molluscs 2.49 0.40 High

16 Preparations of Meat, Fish, Crustaceans, Molluscs 0.64 0.45 High

87 Vehicles (Other than Railway) & Parts 0.60 0.95 High

Moderat
30 Pharmaceutical Products 1.39 1.26
e
Moderat
42 Leather, Saddlery, Handbags 1.30 0.19
e
Moderat
57 Carpets & Other Textile Floor Coverings 5.77 0.51
e
Moderat
68 Articles of Stone, Plaster, Cement, Asbestos, Mica 1.82 0.83
e
Moderat
71 Natural or coloured pearls 1.98 0.97
e
Moderat
73 Articles of Iron & Steel 1.38 0.69
e
Moderat
94 Furniture, Bedding, Mattresses, Lamps 0.43 0.40
e
27 Mineral Fuels, Oils, Waxes 1.46 1.13 Other
29 Organic Chemicals 2.15 1.22 Other
33 Essential Oils, Perfumery, Cosmetics 0.87 0.96 Other

38 Miscellaneous Chemical Products 1.28 1.59 Other

39 Plastic & Articles Thereof 0.54 1.25 Other

40 Rubber & Articles Thereof 1.11 0.79 Other

61 Apparel & Clothing (Knitted/Crocheted) 1.36 0.15 Other

62 Apparel & Clothing (Not Knitted/Crocheted) 1.74 0.13 Other
72 Iron & Steel 1.33 0.49 Other
76 Aluminium & Articles Thereof 1.67 0.69 Other
84 Nuclear Reactors, Boilers, Machinery 0.62 1.06 Other
85 Electrical Machinery & Equipment 0.51 0.68 Other
88 Aircraft, Spacecraft, & Parts 0.35 4.82 Other
90 Optical, Medical, & Precision Instruments 0.41 1.82 Other
Source: ITC Trade Map, Authors Calculations

Note: RCA(India) marked in red in products where India has a lower RCA than US

17
A closer analysis reveals that India has a lower Revealed Comparative Advantage (RCA) in the
following 8 HS codes:
● HS 33 – Essential oils, perfumery, and cosmetic preparations
● HS 38 – Miscellaneous chemical products
● HS 39 – Plastics and articles thereof
● HS 84 – Nuclear reactors, boilers, and mechanical appliances
● HS 85 – Electrical machinery and equipment (India's most exposed category with $11 billion
in exports)
● HS 87 – Vehicles (excluding railway and tramway rolling stock)
● HS 88 – Aircraft, spacecraft, and parts thereof
● HS 90 – Optical, photographic, and medical instruments
These sectors, collectively accounting for $24.4 billion in exports from India within the 24 analyzed
categories, are at heightened risk due to the U.S.'s stronger RCA in these product segments. Any tariff
liberalization in these areas could increase competitive pressures on Indian exports, potentially
impacting market share and profitability.

Conclusion
India’s export relationship with the US is at a critical juncture, where strategic tariff decisions will
define its trade competitiveness. While most tariff lines can be liberalized without significantly
affecting India's overall export performance, a select set of 24 HS codes, making up 90% of India’s
exports to the U.S., requires a cautious approach.

Key Risks and Considerations

● $24.4 billion in vulnerable exports – India faces high exposure in 8 key categories, where the
US holds a stronger Revealed Comparative Advantage (RCA) and could displace Indian
exports.
● Electrical machinery (HS 85) is the most exposed – With $11 billion in exports, this sector is
particularly at risk due to US competitiveness and higher value addition.
● Capital-intensive sectors face the most pressure – Nuclear reactors & mechanical appliances
(HS 84), vehicles (HS 87), aircraft (HS 88), and optical instruments (HS 90) are vulnerable due
to high dependency on advanced manufacturing ecosystems, where the US has a stronger
foothold.

18
 ● Selective tariff liberalization – A blanket reduction in tariffs could put high-risk sectors under
pressure, impacting revenue and employment. A nuanced, sector-specific approach is
necessary.
● Support for high-exposure industries – Electrical machinery, automobiles, and high-tech
manufacturing requires strategic incentives, policy interventions, and investment in
technology upgrades to withstand potential tariff realignments.
● Leveraging India’s strengths – Sectors like pharmaceuticals (HS 30), natural pearls (HS 71),
and labour-intensive industries (apparel, carpets, and furniture) remain strongholds and
should be reinforced through trade agreements and targeted incentives.
● Diversification beyond the US – Expanding market access in Latin America, Africa, and
Southeast Asia can reduce dependency risks and create alternative trade corridors.
Product analysis at 6-digits
For a more granular analysis, we took a look at the top 6-digit HS codes accounting for over 75% of
Indian exports to the US. For evaluating the risk, we applied the following parameters:
 If tariff difference > 10% and share in India's exports > 20%, High Risk
 If tariff difference > 10% and share in India's exports between 10% and 20%, Medium Risk
 If tariff difference > 10% and share in India's exports less than 10%, low risk
 If tariff difference < 10%, low risk.
Based on these parameters, we have come up with the table as below. Please note that this risk
analysis is based on tariff differentials and export share parameters. However, real-world
impacts may vary, as even small tariff changes can be significant for certain commodity
sectors. We recommend corroborating this analysis with market-specific conditions and
industry insights.

19
 India’s export risk assessment to US based on reciprocal tariffs (6-digit level)
India's
exports in Share in
Tariff
HS Code Description 2023 India's Risk category
difference
(US$ exports (%)
million)
Frozen shrimps and
prawns, even smoked,
030617 whether in shell or not, 30 1,811.28 42 High Risk
incl. shrimps and prawns
in ...
40900 Natural honey 60 143.31 84 High Risk
Fruits of the genus
Capsicum or of the genus
90422 69 88.78 32 High Risk
Pimenta, crushed or
ground
Plants, parts of plants,
incl. seeds and fruits, used
121190 30 147.52 33 High Risk
primarily in perfumery, in
pharmacy or ...
Vegetable saps and
130219 extracts (excl. liquorice, 30 217.6 50 High Risk
hops, opium and ephedra)
Mucilages and thickeners,
derived from locust
130232 30 104.14 26 High Risk
beans, locust bean seeds
or guar seeds, whether ...
Shrimps and prawns,
prepared or preserved,
160521 30 72.77 80 High Risk
not in airtight containers
(excl. smoked)
Shrimps and prawns,
prepared or preserved, in
160529 30 402.82 84 High Risk
airtight containers (excl.
smoked)
210690 Food preparations, n.e.s. 142 176.41 27 High Risk
Extracted oleoresins;
concentrates of essential
330190 18 163.7 29 High Risk
oils in fats, fixed oils,
waxes and the like, ...
Womens or girls briefs
610821 and panties of cotton, 11 72.27 56 High Risk
knitted or crocheted
Sports footwear, with
outer soles of rubber,
640319 plastics, leather or 15 104.02 25 High Risk
composition leather and
uppers ...
Footwear with outer soles
of rubber, plastics or
640391 14 140.44 23 High Risk
composition leather, with
uppers of leather, ...

20
 India's
exports in Share in
Tariff
HS Code Description 2023 India's Risk category
difference
(US$ exports (%)
million)
Articles of jewellery and
parts thereof, of precious
711319 11 2,825.91 26 High Risk
metal other than silver,
whether or not ...
Semi-milled or wholly
100630 milled rice, whether or 69 332.39 3 Low Risk
not polished or glazed
Natural barium sulphate
251110 5 94.61 43 Low Risk
"barytes"
Aromatic hydrocarbon
mixtures of which >= 65%
270750 3 110.3 8 Low Risk
by volume, incl. losses,
distils at 250°C by ...

Light oils and prepns, of

271012 petroleum/ bitu-minous 8 5,298.89 21 Low Risk
minerals

Medium oils and

preparations, of
271019 7 972.29 2 Low Risk
petroleum or bituminous
minerals,
Waste oils containing
mainly petroleum or
271099 bituminous minerals (excl. 8 129.71 82 Low Risk
those containing
polychlorinated ...
Fluorinated, brominated
or iodinated derivatives of
290339 5 146.92 85 Low Risk
acyclic hydrocarbons
(excluding ethylene ...
Ketone-phenols and
291450 ketones with other 6 74.57 58 Low Risk
oxygen function
Amino-acids and their
esters; salts thereof (excl.
292249 5 82.63 42 Low Risk
those with > one kind of
oxygen function, ...
Acyclic amides, incl.
acyclic carbamates, and
292419 their derivatives, and salts 5 99.57 40 Low Risk
thereof (excl.
meprobamate ...
Heterocyclic compounds
with nitrogen hetero-
293339 atom[s] only, containing 5 106.42 11 Low Risk
an unfused pyridine ring,
...

21
 India's
exports in Share in
Tariff
HS Code Description 2023 India's Risk category
difference
(US$ exports (%)
million)
Heterocyclic compounds
with nitrogen hetero-
293399 5 102.29 8 Low Risk
atom[s] only (excl. those
containing an unfused ...
Separate chemically
294200 defined organic 4 100.82 7 Low Risk
compounds, n.e.s.
Dried glands and other
organs for organo-
300190 therapeutic uses, whether 10 80.05 73 Low Risk
or not powdered; heparin
...
Medicaments consisting
of two or more
300390 constituents mixed 10 70.04 20 Low Risk
together for therapeutic
or prophylactic ...
Medicaments containing
penicillins or derivatives
300410 10 192.28 27 Low Risk
thereof with a penicillanic
acid structure, ...
Medicaments containing
antibiotics, put up in
300420 measured doses "incl. 10 419.89 35 Low Risk
those for transdermal
administration" ...
Medicaments consisting
of mixed or unmixed
300490 products for therapeutic 10 6,460.18 40 Low Risk
or prophylactic purposes,
...
Synthetic organic
pigments; preparations
320417 based on synthetic 4 83.94 12 Low Risk
organic pigments of a kind
used ...
Insecticides, put up in
380891 forms or packings for 9 102.61 7 Low Risk
retail or as prepns
Fungicides, put up in
forms or packings for
380892 retail sale or as 9 100.67 11 Low Risk
preparations or articles
(excl. ...
Herbicides, anti-sprouting
products and plant-
380893 9 689.33 40 Low Risk
growth regulators, put up
in forms or packings ...

22
 India's
exports in Share in
Tariff Risk category
HS Code Description 2023 India's
difference
(US$ exports (%)
million)
Floor coverings, whether
or not self-adhesive,
391810 which are in rolls or in the 8 76.79 75 Low Risk
form of tiles, and wall
or ...
Sacks and bags, which will
392321 incl. cones, of polymers of 10 109.84 56 Low Risk
ethylene
Sacks and bags, incl.
cones, of plastics (excl.
392329 10 88.14 22 Low Risk
those of polymers of
ethylene)
Articles of plastics and
articles of other materials
392690 10 329.2 44 Low Risk
of heading 3901 to 3914,
n.e.s (excl. ...
New pneumatic tyres, of
rubber, of a kind that are
401170 used on agricultural or 10 215.52 20 Low Risk
forestry vehicles and
machines
New pneumatic tyres, of
rubber, which are of a
401180 kind used on construction, 10 142.63 25 Low Risk
mining or industrial
handling ...
Handbags, whether or not
with shoulder straps, incl.
420221 8 107.52 27 Low Risk
handbags that are without
handles
Handbags, whether or not
with shoulder straps, incl.
420222 5 133.33 26 Low Risk
those without handles,
with outer surface ...
Wallets, purses, key-
pouches, cigarette-cases,
420231 10 99.75 30 Low Risk
tobacco-pouches and
similar articles carried ...
442199 Articles of wood, n.e.s. 9 109.14 56 Low Risk
Registers, account books,
notebooks, order books,
482010 10 71.31 52 Low Risk
receipt books, letter pads,
memorandum pads, ...
Printed books, brochures
and similar printed
490110 10 84.23 27 Low Risk
matter, in single sheets,
whether or not folded ...

23
 India's
exports in Share in
Tariff
HS Code Description 2023 India's Risk category
difference
(US$ exports (%)
million)
Carpets and other textile
floor coverings, of wool or
570110 9 159.48 74 Low Risk
fine animal hair, knotted,
whether or ...
Carpets and other floor
coverings, of wool or fine
570231 animal hair, woven, that 4 83.34 50 Low Risk
are neither tufted or
flocked, ...
Carpets and other floor
coverings, of wool or fine
570310 animal hair, that are 4 112.55 67 Low Risk
tufted "needle punched",
whether ...
Carpets and other floor
coverings, of man-made
570330 textile materials, that are 10 118.93 59 Low Risk
tufted "needle punched",
...
Carpet tiles of vegetable
textile materials or coarse
570390 6 133.01 52 Low Risk
animal hair, tufted
"needle punched", ...
Carpets and other textile
floor coverings, whether
570500 8 120.87 48 Low Risk
or not made up (excl.
knotted, woven or ...
Textile fabrics
impregnated, coated,
590390 covered or laminated with 7 139.07 83 Low Risk
plastics other than
poly"vinyl ...
Mens or boys shirts of
cotton, knitted or
610510 crocheted (excl. -10 153.5 34 Low Risk
nightshirts, T-shirts,
singlets ...
Mens or boys underpants
610711 and briefs of cotton, 3 67.26 42 Low Risk
knitted or crocheted
T-shirts, singlets and other
610910 vests of cotton, knitted or -7 422.8 27 Low Risk
crocheted
T-shirts, singlets and other
vests of textile materials,
610990 -4 191.72 36 Low Risk
knitted or crocheted (excl.
cotton)

24
 India's
exports in Share in
Tariff
HS Code Description 2023 India's Risk category
difference
(US$ exports (%)
million)
Babies garments and
clothing accessories of
611120 -4 241.03 35 Low Risk
cotton, knitted or
crocheted (excl. hats)
Special garments for
professional, sporting or
611420 -1 109.72 52 Low Risk
other purposes, n.e.s., of
cotton, knitted or ...
Special garments for
professional, sporting or
611490 4 80.13 60 Low Risk
other purposes, n.e.s., of
textile materials, ...
Mens or boys trousers,
bib and brace overalls,
620342 2 115.8 27 Low Risk
breeches and shorts, of
cotton (excl. knitted ...
Womens or girls dresses
620442 of cotton (excl. knitted or 1 291.91 37 Low Risk
crocheted and petticoats)
Womens or girls dresses
of synthetic fibres (excl.
620443 -2 158.04 25 Low Risk
knitted or crocheted and
petticoats)
Womens or girls dresses
of artificial fibres (excl.
620444 -2 69.12 29 Low Risk
knitted or crocheted and
petticoats)
Womens or girls dresses
of textile materials (excl.
620449 7 104.76 40 Low Risk
of wool, fine animal hair,
cotton or ...
Womens or girls trousers,
bib and brace overalls,
620462 4 127.94 47 Low Risk
breeches and shorts of
cotton (excl. knitted ...
Mens or boys shirts of
cotton (excl. knitted or
620520 -4 257.63 36 Low Risk
crocheted, nightshirts,
singlets and other ...
Mens or boys shirts of
textile materials (excl. of
620590 2 87.66 38 Low Risk
cotton or man-made
fibres, knitted or ...
Womens or girls blouses,
shirts and shirt-blouses of
620630 1 191.97 35 Low Risk
cotton (excl. knitted or
crocheted and ...

25
 India's
exports in Share in
Tariff
HS Code Description 2023 India's Risk category
difference
(US$ exports (%)
million)
Womens or girls blouses,
shirts and shirt-blouses of
620640 -2 78.52 27 Low Risk
man-made fibres (excl.
knitted or crocheted ...
Womens or girls blouses,
shirts and shirt-blouses of
620690 3 83.97 50 Low Risk
textile materials (excl. of
silk, silk ...
Womens or girls tracksuits
and other garments, n.e.s.
621142 2 118.82 39 Low Risk
of cotton (excl. knitted or
crocheted)
Womens or girls tracksuits
and other garments, n.e.s.
621143 -5 102.47 31 Low Risk
of man-made fibres (excl.
knitted or ...
Printed bedlinen of cotton
630221 (excl. knitted or 2 72.64 81 Low Risk
crocheted)
Bedlinen of cotton (excl.
630231 printed, knitted or 0 337.24 73 Low Risk
crocheted)
Toilet linen and kitchen
linen, of terry towelling or
630260 1 702.49 65 Low Risk
similar terry fabrics of
cotton (excl. ...
Bedspreads of all types of
textile materials (excl.
630419 1 519.65 69 Low Risk
knitted or crocheted,
bedlinen, quilts ...
Articles for interior
furnishing, of cotton (excl.
630492 4 356.16 43 Low Risk
knitted or crocheted,
blankets and travelling ...
Articles for interior
furnishing, of textile
630499 6 69.16 58 Low Risk
materials (excl. of cotton
or synthetic fibres, ...
Flexible intermediate bulk
containers, for packing of
630532 2 208.49 27 Low Risk
goods, of synthetic or
man-made textile ...
Marble, travertine and
alabaster articles thereof,
680221 10 77.5 62 Low Risk
simply cut or sawn, with a
flat or even ...
Granite and articles
thereof, simply cut or
680223 10 157.38 21 Low Risk
sawn, with a flat or even
surface (excl. with a ...

26
 India's
exports in Share in
Tariff
HS Code Description 2023 India's Risk category
difference
(US$ exports (%)
million)
Tiles, flagstones, bricks
and similar articles, of
681019 10 140.33 88 Low Risk
cement, concrete or
artificial stone (excl. ...
Articles of cement,
concrete or artificial
681099 stone, whether or not 10 248 90 Low Risk
reinforced (excl.
prefabricated ...
Ceramic flags and paving,
hearth or wall tiles, of a
690721 3 160.74 8 Low Risk
water absorption
coefficient by weight ...
Carboys, bottles, flasks,
jars, pots, phials and other
701090 10 103.34 27 Low Risk
containers, of glass, of a
kind used ...
702000 Articles of glass, n.e.s. 10 70.60 52 Low Risk
Diamonds, worked, but
710239 not mounted or set (excl. 10 5,926.45 34 Low Risk
industrial diamonds)
Precious and semi-
precious stones, synthetic
710490 10 850.24 59 Low Risk
or reconstructed, worked,
whether or not graded ...
Non-alloy pig iron in pigs,
blocks or other primary
720110 5 92.46 46 Low Risk
forms, containing, by
weight, <= 0,5% of ...
Wire of stainless steel, in
722300 10 69.16 17 Low Risk
coils (excl. bars and rods)
Flanges of iron or steel
730791 (excl. cast or stainless 10 136.12 66 Low Risk
products)
Structures and parts of
structures, of iron or steel,
730890 10 610.99 63 Low Risk
n.e.s. (excl. bridges and
bridge-sections, ...
Nails, tacks, drawing pins,
corrugated nails, staples
731700 10 82.33 85 Low Risk
and similar articles of iron
or steel, ...
Table, kitchen or other
household articles, and
732393 10 110.38 28 Low Risk
parts thereof, of stainless
steel (excl. cans, ...
Articles of non-malleable
732510 10 81.07 43 Low Risk
cast iron, n.e.s.

27
 India's
exports in Share in
Tariff
HS Code Description 2023 India's Risk category
difference
(US$ exports (%)
million)
Cast articles of iron or
steel, n.e.s. (excl. articles
732599 10 218.40 28 Low Risk
of non-malleable cast
iron, and grinding ...
Articles of iron or steel,
forged or stamped, but
732619 10 96.94 27 Low Risk
not further worked, n.e.s.
(excl. grinding ...
Articles of iron or steel,
n.e.s. (excl. cast articles or
732690 9 298.58 35 Low Risk
articles of iron or steel
wire)
741999 Articles of copper, n.e.s. 10 113.88 34 Low Risk
Unwrought aluminium
760120 7 83.96 9 Low Risk
alloys
Wire of non-alloy
aluminium, with a
760511 maximum cross-sectional 8 122.94 26 Low Risk
dimension of > 7 mm
(excl. stranded ...
Structures and parts of
structures, of aluminium,
761090 10 68.52 71 Low Risk
n.e.s., and plates, rods,
profiles, tubes ...
Stranded wire, cables,
plaited bands and the like,
761410 8 209.69 59 Low Risk
of aluminium, with steel
core (excl. such ...
Articles of aluminium,
761699 10 206.04 46 Low Risk
n.e.s.
Compression-ignition
internal combustion
840890 piston engine "diesel or 8 72.86 7 Low Risk
semi-diesel engine" (excl.
...
Parts suitable for use
solely or principally with
840991 8 99.71 23 Low Risk
spark-ignition internal
combustion piston ...
Parts suitable for use
solely or principally with
840999 8 341.88 31 Low Risk
compression-ignition
internal combustion ...
Turbojets of a thrust > 25
841112 8 347.58 10 Low Risk
kN
Parts of turbojets or
841191 8 123.22 81 Low Risk
turbopropellers, n.e.s.
Parts of pumps for liquids,
841391 8 246.67 42 Low Risk
n.e.s.

28
 India's
exports in Share in
Tariff
HS Code Description 2023 India's Risk category
difference
(US$ exports (%)
million)
Air pumps, air or other gas
compressors and
841480 8 134.10 26 Low Risk
ventilating or recycling
hoods incorporating a ...
Parts of machinery and
apparatus for filtering or
842199 10 115.84 23 Low Risk
purifying liquids or gases,
n.e.s.
Self-propelled trucks
fitted with lifting or
842710 handling equipment, 8 161.07 83 Low Risk
powered by an electric
motor
Self-propelled front-end
842951 8 119.18 57 Low Risk
shovel loaders
Parts of machinery of
843149 heading 8426, 8429 and 8 257.64 34 Low Risk
8430, n.e.s.
Cash registers
847050 incorporating a calculating 0 83.27 74 Low Risk
device
847290 Office machines, n.e.s. 8 82.6 25 Low Risk
Parts of machines and
847990 mechanical appliances, 8 90.05 29 Low Risk
n.e.s.
Appliances for pipes,
boiler shells, tanks, vats or
848180 8 233.82 22 Low Risk
the like (excl. pressure-
reducing valves, ...
Parts of valves and similar
articles for pipes, boiler
848190 8 262.12 34 Low Risk
shells, tanks, vats or the
like, n.e.s.
Tapered roller bearings,
848220 incl. cone and tapered 2 74.93 30 Low Risk
roller assemblies
Transmission shafts, incl.
848310 cam shafts and crank 8 189.45 39 Low Risk
shafts, and cranks
Gears and gearing for
machinery (excl. toothed
848340 8 504.92 55 Low Risk
wheels, chain sprockets
and other transmission ...
Toothed wheels, chain
sprockets and other
848390 transmission elements 6 71.61 30 Low Risk
presented separately;
parts ...

29
 India's
exports in Share in
Tariff
HS Code Description 2023 India's Risk category
difference
(US$ exports (%)
million)
Parts of machinery of
chapter 84, not intended
848790 8 76.19 40 Low Risk
for a specific purpose,
n.e.s.
Parts suitable for use
solely or principally with
850300 8 277.24 24 Low Risk
electric motors and
generators, electric ...
850440 Static converters 10 599.07 37 Low Risk
Parts of electrical
850490 transformers and 10 111.76 25 Low Risk
inductors, n.e.s.
Telephones for cellular
networks "mobile
851712 0 4,704.88 33 Low Risk
telephones" or for other
wireless networks
Machines for the
reception, conversion and
851762 transmission or 1 164.62 19 Low Risk
regeneration of voice,
images or ...
Electrical apparatus for
switching electrical
853690 10 143.22 31 Low Risk
circuits, or for making
connections to or in ...
Boards, cabinets and
similar combinations of
853710 apparatus for electric 8 152.38 25 Low Risk
control or the distribution
...
Boards, panels, consoles,
desks, cabinets and other
853810 8 93.92 29 Low Risk
bases for the goods of
heading 8537, not ...
Parts suitable for use
solely or principally with
853890 8 170.67 26 Low Risk
the apparatus of heading
8535, 8536 or 8537, ...
Photosensitive
semiconductor devices,
854140 incl. photovoltaic cells 0 1788.27 97 Low Risk
whether or not assembled
in ...
Electric conductors, for a
voltage <= 1.000 V,
854449 10 186.06 29 Low Risk
insulated, not fitted with
connectors, n.e.s.
Electric conductors, for a
854460 voltage > 1.000 V, 10 112.62 21 Low Risk
insulated, n.e.s.

30
 India's
exports in Share in
Tariff
HS Code Description 2023 India's Risk category
difference
(US$ exports (%)
million)
Tractors, of an engine
power > 37 kW but <= 75
870193 kW (excl. those of heading 10 131.84 22 Low Risk
8709, pedestrian-
controlled ...
Tractors, of an engine
power > 75 kW but <= 130
870194 kW (excl. those of heading 10 81.65 78 Low Risk
8709, pedestrian-
controlled ...
Brakes and servo-brakes
and their parts, for
870830 9 345.37 46 Low Risk
tractors, motor vehicles
for the transport of ...
Gear boxes and parts
thereof, for tractors,
870840 motor vehicles for the 10 129.76 18 Low Risk
transport of ten or more
...
Drive-axles with
differential, whether or
870850 not provided with other 10 281 40 Low Risk
transmission components,
...
Road wheels and parts
and accessories thereof,
870870 for tractors, motor 10 74.07 45 Low Risk
vehicles for the transport
...
Suspension systems and
parts thereof, incl. shock-
870880 10 84.79 39 Low Risk
absorbers, for tractors,
motor vehicles for ...
Silencers "mufflers" and
exhaust pipes, and parts
870892 10 100.14 38 Low Risk
thereof, for tractors,
motor vehicles for ...
Steering wheels, steering
columns and steering
870894 10 76.88 28 Low Risk
boxes, and parts thereof,
for tractors, motor ...
Parts and accessories, for
tractors, motor vehicles
870899 10 893.79 26 Low Risk
for the transport of ten or
more persons, ...
Parts of aeroplanes or
helicopters, n.e.s.
880330 3 416.79 34 Low Risk
(excluding those for
gliders)

31
 India's
exports in Share in
Tariff
HS Code Description 2023 India's Risk category
difference
(US$ exports (%)
million)
Vessels, incl. lifeboats
(excl. warships, rowing
890690 10 109.17 14 Low Risk
boats and other vessels of
heading 8901 to ...
Optical fibres, optical fibre
bundles and cables (excl.
900110 10 161.44 34 Low Risk
made up of individually
sheathed fibres ...
Electro-diagnostic
apparatus, incl. apparatus
901819 8 79.84 80 Low Risk
for functional exploratory
examination or for ...
Instruments and
appliances used in
901890 7 110.15 24 Low Risk
medical, surgical or
veterinary sciences, n.e.s.
Metal furniture (excl. for
offices, seats and medical,
940320 10 121.35 48 Low Risk
surgical, dental or
veterinary furniture)
Wooden furniture (excl.
940360 for offices, kitchens and 10 324.57 50 Low Risk
bedrooms, and seats)
Articles of bedding and
similar furnishing, fitted
940490 4 280.61 64 Low Risk
with springs or stuffed or
internally filled ...
Castor oil and fractions
thereof, whether or not
151530 13 96.62 10 Medium Risk
refined, but not
chemically modified
New pneumatic tyres, of
rubber, of a kind used for
401120 13 84.7 13 Medium Risk
buses and lorries (excl.
tyres with lug, ...
Articles of jewellery and
parts thereof, of silver,
711311 13 324.28 19 Medium Risk
whether or not plated or
clad with other ...

Source: ITC Trade Map, CATR Analysis

32
Chapter 4: India’s Trade Prospects in North America: Opportunities
amid US tariff shifts

4.1 Introduction

The evolving global trade landscape, shaped by tariff wars and shifting economic alliances, has created
new opportunities and challenges for emerging economies like India. The imposition of tariffs by the
US on Canada and Mexico has significantly altered trade flows, prompting these countries to seek
alternative suppliers for key products. This shift presents India with a strategic opening to expand its
exports to North America by filling the supply gap left by US firms. By leveraging competitive pricing,
trade agreements, and supply chain efficiencies, India can strengthen its trade presence in sectors
such as refined petroleum, vehicle components, plastics, and chemicals.

For India, the second Trump administration presents both risks and opportunities. While previous US
tariffs on steel, aluminium, and certain tech products created hurdles for Indian exporters, a renewed
push for bilateral trade deals could open avenues for deeper economic engagement. At the same time,
the indirect impact of US actions—whether through global supply chain disruptions or shifts in
investment flows—will be crucial in shaping India’s trade strategy moving forward. If these tariffs
remain in place for a year, they could become the biggest US tax hike since the Clinton-era tax
increases in the 1990s—not just in tariffs but in overall tax terms. This underscores the aggressive
nature of Trump’s renewed trade strategy, which appears more focused on economic nationalism and
strategic leverage.

Additionally, as India explores deeper trade engagements with North America, the potential for an
India-US Free Trade Agreement (FTA) becomes increasingly relevant. A well-negotiated FTA could
enhance India's competitiveness in the US market by reducing tariff barriers and improving market
access for critical industries. This chapter examines India's opportunities in Canada and Mexico
following US tariff impositions and evaluates how an India-US FTA could further strengthen India's
trade prospects in North America. Through sectoral trade analysis and tariff simulations, the chapter
aims to provide insights into how India can strategically navigate these shifts to enhance its global
trade position.

33
4.1 Trade Diversion Impact: Decline in US Exports to Canada and Mexico and Emerging
Opportunities for India

The proposed increase in import tariffs by Canada and Mexico on US products, in response to the new
US trade policy under President Trump’s administration, is set to significantly impact trade flows
between these countries. Canada and Mexico’s decision to impose a 25% tariff on various US goods
will lead to a sharp decline in US exports to these countries, resulting in substantial trade diversion.
Figure 34, indicates that US exports to Canada and Mexico will decline drastically due to the tariff
increase. US exports to Canada will drop from US$ 262 billion to US$ 32.5 billion, a decrease of US$
229.5 billion (-88%). Meanwhile, US exports to Mexico will shrink from US$ 225.6 billion to US$ 37.4
billion, a reduction of US$ 188.2 billion (-83%). This steep decline in US exports will disrupt existing
supply chains and significantly affect industries reliant on cross-border trade, including agriculture,
consumer goods, and manufacturing.

Figure 4.1: Change in Canada and Mexico total imports from US due to increase in tariffs

300.0 -83%
262.0 -83% -84%
250.0 225.6 -84%
-85%
USD Billion

200.0

% Change
-85%
150.0 -86%
-86%
100.0 -87%
-88% 37.4 -87%
50.0 32.5
-88%
0.0 -88%
Canada Mexico
Actual Imports from USA (2023) Simulated Imports from USA (2023) % Change

Source: Author’s Calculation based on TINA (UNESCAP)

The trade diversion effect will compel Canada and Mexico to seek alternative suppliers for goods
previously imported from the US. This shift presents a substantial opportunity for other nations,
particularly India, to expand their market presence in North America. Canada and Mexico will likely
increase their imports from countries such as India, China, and the European Union. The trade
simulation results from the TINA (Trade Intelligence and Negotiation Adviser), Trade Simulation

3
For the analysis the following assumption is made: The simulation has been done using TINA
UNESCAP on tariff lines where the current MFN/ Preferential tariffs faced by US products in Canada
and Mexico are zero.

34
Module4 indicate a significant decline in US exports to both Canada and Mexico due to the proposed
25% tariff increase imposed by these countries in retaliation to US tariff measures. The impact is
particularly severe in key product categories, leading to substantial trade diversion and creating
opportunities for alternative suppliers, including India.

4.1.1 Decline in US exports to Canada

Table 4.1 highlights the ten product categories experiencing the largest decline in US exports to
Canada. The most severely affected category is vehicles (HS 87), where imports from the US drop by
98%, from US$ 53.31 billion to just US$ 1.23 billion. Other highly impacted categories include nuclear
reactors and machinery (HS 84), which declined by 93%, and mineral fuels (HS 27), with a 94% drop.
Additionally, electrical machinery (HS 85), plastics (HS 39), and pharmaceuticals (HS 30) experience
declines ranging from 80% to 100%. Notably, pharmaceuticals see a complete loss of US exports to
Canada. These categories present significant opportunities for India, given its established expertise in
pharmaceuticals, chemicals, and machinery production.

Table 4.1: Top 10 product categories with largest decline in imports by Canada from US
due to tariff hike

Change in
Actual Simulated value of
Canada Canada Canada
%
S. No. HS 2 Product label Imports Imports imports from
Decline
from US from US US in
(US$ bn) (US$ bn) simulation
(US$ bn)
1 87 Vehicles other than railway 53.31 1.23 -52.08 -98%
or tramway rolling stock, and
parts and accessories
thereof
2 84 Nuclear reactors, boilers, 37.73 2.83 -34.90 -93%
machinery and mechanical
appliances; parts thereof
3 27 Mineral fuels, mineral oils 29.78 1.93 -27.86 -94%
and products of their
distillation; bituminous
substances; mineral
4 85 Electrical machinery and 12.17 1.51 -10.67 -88%
equipment and parts
thereof; sound recorders
and reproducers, television
5 39 Plastics and articles thereof 13.26 2.65 -10.61 -80%
6 38 Miscellaneous chemical 6.01 0.72 -5.29 -88%
products
7 30 Pharmaceutical products 5.20 0.00 -5.19 -100%

4
More details available in section 4.4

35
 8 73 Articles of iron or steel 5.90 0.75 -5.15 -87%
9 90 Optical, photographic, 6.11 1.06 -5.05 -83%
cinematographic, measuring,
checking, precision, medical
or surgical
10 48 Paper and paperboard; 5.24 1.24 -3.99 -76%
articles of paper pulp, of
paper or of paperboard

Source: Author’s calculation based on TINA (UNESCAP)

4.1.2 Decline in US exports to Mexico

Table 4.2 shows that Mexico's largest drop in imports from the US occurs in mineral fuels (HS 27),
declining by 86% from US$ 38.0 billion to US$ 5.4 billion. Nuclear reactors and machinery (HS 84) and
electrical machinery (HS 85) also see substantial reductions of 89% and 84%, respectively. Plastics (HS
39), vehicles (HS 87), and optical equipment (HS 90) experience similar declines. Additionally, cereals
(HS 10) and meat (HS 02), both vital agricultural exports from the US, plummet by 98% and 93%,
respectively. This sharp decline in agricultural products creates a unique opportunity for India to
expand its cereal and meat exports to Mexico.

Table 4.2: Top 10 Product Categories at HS 2 with largest decline in imports by Mexico from US
due to hike in tariffs

Simulated Change in US$

Actual MEX
MEX value of MEX
Imports %
S. No. HS 2 Product label Imports import from US
from US Decline
from US in simulation
(US$ bn)
(US$ bn) (US$ bn)
1 27 Mineral fuels, mineral oils and 38.0 5.4 -32.6 -86%
products of their distillation…
2 84 Nuclear reactors, boilers, 34.0 3.8 -30.2 -89%
machinery and mechanical
appliances; parts thereof
3 85 Electrical machinery and 24.9 4.0 -20.8 -84%
equipment and parts thereof;
sound recorders and
reproducers, television
4 39 Plastics and articles thereof 19.2 1.8 -17.4 -91%
5 87 Vehicles other than railway or 25.2 9.4 -15.8 -63%
tramway rolling stock, and
parts and accessories thereof
6 90 Optical, photographic, 7.5 0.9 -6.6 -88%
cinematographic, measuring,
checking, precision, medical or
surgical
7 10 Cereals 6.1 0.1 -6.0 -98%
8 38 Miscellaneous chemical 6.7 0.7 -6.0 -89%
products

36
 9 73 Articles of iron or steel 5.9 0.4 -5.5 -93%
10 02 Meat and edible meat offal 4.5 0.3 -4.2 -93%

Source: Author’s Calculation based on TINA (UNESCAP)

4.2 Opportunities for India in the North American Market

The trade diversion caused by the tariff increases opens up new avenues for India to enhance its
exports to both Canada and Mexico. Vehicles and Machinery (HS 87, 84): India's growing automotive
and engineering sectors position it well to capitalize on the sharp decline in US vehicle and machinery
exports.
Mineral Fuels (HS 27):
With India's expanding refining capacity, there is potential to increase fuel exports to these markets.

Electrical and Optical Equipment (HS 85, 90): India's electronics and precision instrument industries
can provide an alternative supply source.

Pharmaceuticals and Chemicals (HS 30, 38): India’s globally competitive pharmaceutical industry can
benefit from the complete elimination of US pharmaceutical exports to Canada.

Plastics and Iron & Steel Articles (HS 39, 73): India can increase its shipments of plastic products and
steel components to replace US suppliers.

Agricultural Products (HS 10, 2): Given Mexico’s high dependency on US cereals and meat, India has a
significant opportunity to expand its agribusiness exports.

The analysis of Tables 4.3 and 4. 4 provides insight into the significant decline in US exports to Canada
and Mexico at the HS 8-digit level due to the proposed tariff hikes and the potential opportunities for
India to fill the gap through trade diversion. Table 4.3 highlights the top 10 product categories
experiencing the largest decline in Canadian imports from the US.

The most affected sectors include petroleum oils and related products (HS 270900, 271012, and
271019), vehicles and vehicle parts (HS 870431, 870324, 870323, 870829, 870390, and 870899), and
internal combustion engines (HS 840734). The steepest declines are seen in crude petroleum oils (-
US$ 10,302 million, 100% decline) and transport vehicles with internal combustion engines (-US$ 9,745
million, 100% decline). Potential for trade diversion to India remains high in certain refined petroleum
products (HS 271019, US$ 89.52 million) and vehicle parts (HS 870323, 870829, and 870899).

37
 Table 4.3: Top 10 Products with the sharpest decline in Canadian imports from the US and
corresponding growth potential for Indian exports
Simulated
Simulated Increase in
Decline in % Decline Canada
Canada (Canada Imports
S. No. HS 6 Product label
Imports from Imports from India
US from US) due to Trade
(US$ Mn) Diversion
(US$ Mn)
Oils petroleum oils and oils obtained No Trade
1 270900 -10302 -100
from bituminous minerals crude Diversion
Vehicles spark ignition internal
8704 combustion piston engine for transport No Trade
2 -9745 -100
31 of goods of a gvw not exceeding 5 Diversion
tonnes nec in item no 87041

Petroleum oils and oils from bituminous

3 271012 minerals not containing biodiesel not -7622 -93.51 0.06
crude not waste oils …

Vehicles spark ignition internal

No Trade
4 870324 combustion reciprocating piston engine -5894 -100
Diversion
cylinder capacity exceeding 3000cc
Vehicles spark ignition internal
combustion reciprocating piston engine
5 870323 -4978 -100 8.37
cylinder capacity exceeding 1500cc but
not exceeding 3000cc

Petroleum oils and oils from bituminous

6 271019 minerals not containing biodiesel not -4349 -80.51 89.52
crude not waste oils…

Vehicles parts and accessories of bodies

7 870829 -3998 -100 3.09
other than safety seat belts
Engines reciprocating piston engines
used for propulsion of vehicles of
8 840734 -3733 -100 0.004
chapter 87 of a cylinder capacity
>1,000cc
Vehicles for transport of persons other
than those of heading no 8702 nec in
9 870390 -3350 -100 0.002
heading no 8703 including station
wagons and racing cars
Vehicle parts and accessories nec in
10 870899 -2771 -100 3.03
heading no 8708

Source: Author’s Calculation based on TINA (UNESCAP)

Table 4.4 presents a similar picture for Mexico, where the most substantial declines are observed in
petroleum oils (HS 271012 and 271019), natural gas (HS 271121), diesel and internal combustion
engines (HS 840820), maize (HS 100590), vehicle parts (HS 870829), plastics (HS 392690), and chemical
products (HS 382490). Petroleum oils and natural gas see the most drastic reductions, amounting to

38
a combined US$ 30,385 million in lost US exports to Mexico. India’s potential trade gains are seen in
selected products, with increased exports primarily in vehicle parts (HS 870829, US$ 9.2 million),
plastics (HS 392690, US$ 4.0 million), chemical products (HS 382490, US$2.8 million), and iron or steel
articles (HS 732690, US$ 8.3 million).

Table 4.4: Top 10 Products with sharpest decline in Mexican Imports from the US and
corresponding growth potential for Indian exports

Simulated
Simulated %
Increase in
Decline in Decline
Mexico
Mexico
S. No HS 6 Product Label Imports from
Imports (Mexico
India due to
from US Imports
trade diversion
(US$ Mn) from US)
(US$ mn)
Petroleum oils and oils from bituminous
minerals not containing biodiesel not
crude not waste oils preparations nec No Trade
1 271012 -15362.5 -88.44
containing by weight 70 or more of Diversion
petroleum oils or oils from bituminous
minerals light oils and preparations
Petroleum oils and oils from bituminous
minerals not containing biodiesel not
crude not waste oils preparations nec
2 271019 -8413.3 -74.32 0.2
containing by weight 70 or more of
petroleum oils or oils from bituminous
minerals not light oils and preparations
Petroleum gases and other gaseous
No Trade
3 271121 hydrocarbons in gaseous state natural -6610.0 -100
Diversion
gas
Engines compression ignition internal
combustion piston engines diesel or
4 840820 -5925.8 -95.96 0.2
semi-diesel engines of a kind used for the
propulsion of vehicles of chapter 87
No Trade
5 100590 Cereals maize corn other than seed -5203.6 -100
Diversion
Vehicles parts and accessories of bodies
6 870829 -2791.0 -100 9.2
other than safety seat belts
7 392690 Plastics other articles nec in chapter 39 -2460.8 -86.98 4.0
Engines reciprocating piston engines of a
kind used for the propulsion of vehicles
8 840734 -2288.6 -100 0.1
of chapter 87 of a cylinder capacity
exceeding 1000cc
Chemical products preparations and
residual products of the chemical or
9 382490 -2158.0 -100 2.8
allied industries nec or included in
heading no 3824
10 732690 Iron or steel articles necin heading 7326 -2035.7 -100 8.3

Source: Author’s Calculation based on TINA (UNESCAP)

39
The tariff war between the US, Canada, and Mexico has caused a major shift in trade flows, with US
exports to both countries expected to decline sharply across multiple sectors. This trade diversion
creates a favourable environment for India to strengthen its presence in the North American market
by supplying goods that were previously imported from the US Strategic efforts, including trade
agreements, quality enhancements, and competitive pricing, can help India capture this emerging
market opportunity. India has a significant opportunity to enhance its exports to Canada and Mexico,
particularly in refined petroleum products, vehicle components, plastics, and chemical industries.
While India may not fully replace US exports in these categories, it can strategically increase its market
share in these nations by leveraging competitive pricing, existing trade agreements, and supply chain
efficiencies. The trade diversion effect suggests that Indian exporters should focus on scaling up
production and meeting quality standards to capitalize on the shift in trade dynamics resulting from
the US tariff hikes.

4.3 Tariff Simulations under a potential U.S.-India FTA

Recent discussions on a bilateral trade agreement between India and the United States have gained
momentum amid former President Donald Trump’s announcement of reciprocal tariffs on key trading
partners. The evolving trade landscape raises critical questions about the potential impact on India's
exports and market access to the US. Given the historical trade tensions and tariff disputes, a
structured trade agreement could offer a pathway to tariff reductions, improved market entry, and
strategic sectoral gains for India. To assess these potential outcomes, this study employs partial
equilibrium tariff simulations, analysing how India's trade flows, export competitiveness, and overall
economic gains could shift under a formalized agreement. The findings aim to provide insights into
whether a trade deal could mitigate the adverse effects of US tariffs while unlocking new opportunities
for India's exporters in key industries.

For the analysis, we have used TINA (Trade Intelligence and Negotiation Adviser), a partial equilibrium
trade model, to estimate the effects of trade policy changes. The platform is developed by the United
Nations Economic and Social Commission for Asia and the Pacific (UNESCAP5). It is designed to assist
policymakers, trade analysts, and negotiators in assessing the potential effects of Free Trade
Agreements (FTAs), tariff reductions, and other trade policy changes. TINA provides data-driven
insights to help countries optimize trade agreements and make informed policy decisions. TINA utilizes
trade data from sources like UN COMTRADE, incorporating country-level exports, imports, and tariff
schedules. The platform simulates a full tariff reduction (zero tariffs) scenario, estimating changes in

5
For User Guide and Explanatory Note for TINA see https://www.unescap.org/sites/default/d8files/knowledge-
products/draft%20TINA_User_Guide_Jan_2021.pdfm

40
import demand and export supply based on trade elasticities. The model applies import demand and
export supply elasticities, typically sourced from UNESCAP, World Bank, and WTO databases, to assess
how trade volumes respond to tariff elimination. TINA evaluates how removing tariffs increases
bilateral trade between partner countries (trade creation) and whether it shifts trade flows away from
non-preferential suppliers (trade diversion). The model compares current trade values with simulated
zero-tariff trade flows, highlighting the expected increase in exports and imports.

The analysis in this section focuses on supply and demand within a specific market, ignoring external
factors. It examines individual market behaviour, under the assumption that all other factors remain
constant. However, this approach has limitations as it operates within a partial equilibrium framework,
not considering changes in exchange rates, income, international disturbances, or external influences
that can impact the market. Additionally, the equilibrium is based on assumptions about the elasticity,
which may not fully reflect real-world situations. Furthermore, this analysis typically focuses on static
equilibrium, meaning it evaluates short-term market behaviour without considering long-term
adjustments. In this section, we attempt to assess the impact on the bilateral exports of India with the
US, following the complete elimination of tariffs.

For the analysis, the following scenario has been considered:

● Scenario 1: Impact of reduction of tariff by US on India’s exports to US for all products tariff
lines.
Assumption- The US has reduced tariffs to 0% in the year 2023 on its imports from India. For this
analysis, infinite export supply elasticity has been assumed, which indicates that with any increase in
demand for goods due to a decline in tariffs to 0%, India will be able to supply. Hence, there will be no
increase in prices and entails the import quantity effect only.

Table 4.5 below presents the agricultural product categories that are expected to experience an
increase in India’s exports following the US’s tariff reduction. The values in the columns represent the
monetary import figures before and after the tariff removal. The percentage change in imports
indicates the expected growth in demand for Indian products due to the reduction in import tariffs.

41
 Table 4.5: Change in India’s Exports to US, Post Liberalisation, for products under Agriculture
Sector at HS 2-Digit Level

Change in Change in %
US$ Value value of US
Actual US Simulated
of US import imports from
imports US imports
HS 2 Product label from IND in IND in
from IND from IND
simulation simulation
(US$ mn) (US$ mn)
IND compared to
(US$ mn) actual value

Dairy produce; birds' eggs; natural

04 honey; edible products of animal 161.08 165.21 4.14 2.60%
origin, not elsewhere
Live trees and other plants; bulbs,
06 roots and the like; cut flowers and 20.90 24.93 4.04 19.30%
ornamental foliage
10 Cereals 18.24 18.81 0.57 3.10%
Products of the milling industry;
11 26.24 28.39 2.15 8.20%
malt; starches; inulin; wheat gluten

Oil seeds and oleaginous fruits;

12 miscellaneous grains, seeds and 161.52 166.69 5.17 3.20%
fruit; industrial or medicinal

Lac; gums, resins and other

13 313.21 314.99 1.78 0.60%
vegetable saps and extracts

Vegetable plaiting materials;

14 vegetable products not elsewhere 17.50 18.25 0.75 4.30%
specified or included

Animal, vegetable or microbial fats

15 and oils and their cleavage 27.89 31.17 3.29 11.80%
products; prepared edible fats
Preparations of meat, of fish, of
16 crustaceans, molluscs or other 560.70 594.55 33.85 6.00%
aquatic invertebrates
Preparations of vegetables, fruit,
20 119.34 133.54 14.20 11.90%
nuts or other parts of plants
21 Miscellaneous edible preparations 19.19 26.68 7.49 39.00%

Source: Author’s Calculation based on TINA (UNESCAP)

Based on Table 4. 5, the US’s tariff reduction on agricultural products is expected to drive an increase
in India’s exports across various HS 2-digit level product categories. The most significant absolute
growth is observed in Preparations of meat, fish, and other aquatic invertebrates (HS 16), where
exports from India to the US are projected to rise by 6.0%. Similarly, Preparations of vegetables, fruit,
and nuts (HS 20) are expected to grow by 11.9%

42
Among the high-growth categories in percentage terms, the following come out prominently:
- Miscellaneous edible preparations (HS 21): 39%
- Live trees and other plants (HS 06): 19.3%
- Animal and vegetable fats (HS 15): 11.8%
- Milling products (HS 11): 8.2%
On the lower end of growth, Lac, gums, and resins (HS 13) show a modest increase of 0.6%, while
Dairy products, cereals, and oil seeds (HS 04, 10, and 12) experience moderate growth ranging from
2.6% to 3.2%. Overall, the results suggest that India stands to gain significantly in both absolute and
percentage terms across multiple agricultural product categories, reinforcing the potential benefits of
trade liberalization in this sector.

Table 4.6: Change in India’s Exports to US, Post Liberalisation, for products under Industry
Sector at HS 2-Digit Level

Change in Change in %
value of US value of US
Actual US Simulated
import from import from
imports from US imports
HS 2 Product label IND in IND in
IND from IND
simulation simulation
(US$ Mn) (US$ Mn)
compared to
(US$ Mn)
actual value
Inorganic chemicals; organic
or inorganic compounds of
28 114.45 123.42 8.97 7.80%
precious metals, of rare-earth
metals
29 Organic chemicals 2,782.71 3,054.50 271.79 9.80%
Tanning or dyeing extracts;
tannins and their derivatives;
32 119.01 124.05 5.05 4.20%
dyes, pigments and other
colouring
Essential oils and resinoids;
33 perfumery, cosmetic or toilet 61.38 66.27 4.89 8.00%
preparations
Albuminoidal substances;
35 modified starches; glues; 11.18 12.42 1.24 11.10%
enzymes
Miscellaneous chemical
38 59.06 64.37 5.31 9.00%
products
39 Plastics and articles thereof 260.16 284.07 23.91 9.20%
40 Rubber and articles thereof 424.76 465.96 41.20 9.70%
72 Iron and steel 34.00 48.63 14.63 43.00%
73 Articles of iron or steel 941.22 1,025.74 84.52 9.00%
74 Copper and articles thereof 50.04 53.46 3.43 6.80%
75 Nickel and articles thereof 1.62 1.76 0.14527 9.00%

43
 Aluminium and articles
76 462.26 527.65 65.40 14.10%
thereof
Other base metals; cermets;
81 6.55 7.15 0.59341 9.10%
articles thereof
Tools, implements, cutlery,
spoons and forks, of base
82 108.82 170.40 61.58 56.60%
metal; parts thereof of base
metal
Miscellaneous articles of base
83 96.09 101.82 5.73 6.00%
metal
Nuclear reactors, boilers,
84 machinery and mechanical 2,612.51 2,716.63 104.11 4.00%
appliances; parts thereof
Electrical machinery and
equipment and parts thereof;
85 630.15 672.71 42.55 6.80%
sound recorders and
reproducers, television

Source: Author’s Calculation based on TINA (UNESCAP)

The simulation results in Table 4. 6 indicate that India’s industrial sector exports to the US are expected
to experience significant gains following tariff reductions. Among the largest absolute increases,
Organic chemicals (HS 29) show the highest projected gain, with exports rising by a 9.8% increase.
Similarly, Articles of iron or steel (HS 73) and Nuclear reactors, boilers, and machinery (HS 84) witness
substantial gains of 9.0% and 4% respectively. The largest growth is observed in Tools, implements,
cutlery, and base metal parts (HS 82), with a 56.6% increase, followed by Iron and steel (HS 72) at
43.0%. Aluminum and articles (HS 76) also experience a notable 14.1% increase, indicating the
potential for India to expand its market share in these industrial goods. Other noteworthy categories
include Plastics (HS 39), Rubber (HS 40), and Miscellaneous chemical products (HS 38), all registering
growth between 9.0% and 9.7%, signifying the competitiveness of India’s manufacturing exports.
Similarly, Essential oils and cosmetics (HS 33) and Albuminoidal substances, glues, and enzymes (HS
35) demonstrate strong percentage growth at 8.0% and 11.1%, respectively.
Overall, the post-liberalization scenario suggests that India’s exports to the US in industrial product
categories would rise considerably, particularly in chemicals, metals, and machinery-related sectors,
highlighting potential benefits from tariff reductions and trade liberalization in these industries.

44
 Table 4.7: Change in India’s Exports to US, Post Liberalisation, for products under Consumer
Sector at HS 2-Digit Level

Change in
US$ Value Change in %
Actual US Simulated of US value of US
imports US imports import imports from IND
HS 2 Product label
from IND from IND from IND in simulation
(US$ Mn) (US$ Mn) in compared to
simulation actual value
(US$ Mn)

50 Silk 0.4 0.5 0.0 0.04

52 Cotton 17.6 20.7 3.1 0.18
Other vegetable textile fibres; paper
53 yarn and woven fabrics of paper 4.6 5.0 0.4 0.09
yarn
Man-made filaments; strip and the
54 19.0 27.7 8.7 0.46
like of man-made textile materials
55 Man-made staple fibres 120.5 138.5 18.0 0.15
Wadding, felt and nonwovens;
56 special yarns; twine, cordage, ropes 25.6 28.6 3.0 0.12
and cables and articles thereof
Carpets and other textile floor
57 881.5 950.1 68.6 0.08
coverings
Special woven fabrics; tufted textile
58 fabrics; lace; tapestries; trimmings; 26.9 36.7 9.8 0.36
embroidery
Impregnated, coated, covered or
59 laminated textile fabrics; textile 199.3 219.5 20.1 0.1
articles of a kind suitable
60 Knitted or crocheted fabrics 51.4 74.0 22.5 0.44
Articles of apparel and clothing
61 1315.7 2326.5 1010.8 0.77
accessories, knitted or crocheted
Articles of apparel and clothing
62 accessories, not knitted or 1881.8 2936.6 1054.8 0.56
crocheted
Other made-up textile articles; sets;
63 worn clothing and worn textile 2421.6 3031.1 609.5 0.25
articles; rags
Footwear, gaiters and the like; parts
64 152.5 171.8 19.4 0.13
of such articles

Source: Author’s Calculation based on TINA (UNESCAP)

The simulation results (Table 4.7) indicate a significant boost in India's consumer goods exports to the
US following tariff reductions, with the apparel and textile sector experiencing the most substantial
gains. Apparel and clothing accessories, both knitted or crocheted (HS 61) and non-knitted (HS 62),
saw remarkable growth of 76.8% and 56.1%, respectively, adding over $2 billion to India’s exports.

45
Other made-up textile articles (HS 63) also rose by 25.2%, reflecting strong demand for home textiles.
Man-made filaments (HS 54) and knitted/crocheted fabrics (HS 60) show sharp increases of 45.9%
and 43.9%, highlighting potential expansion in synthetic textiles. Additionally, carpets and textile floor
coverings (HS 57) grew by 7.8%, reinforcing India's position in this segment, while footwear (HS 64)
sees a 12.7% increase, signalling growth opportunities in leather and non-leather shoes. Overall, tariff
liberalization could significantly strengthen India’s market position in the US consumer goods sector,
particularly in textiles, apparel, and footwear.

Table 4.8: Change in India’s Exports to US, Post Liberalisation, for products under Others
Sector at HS 2-Digit Level
Change in %
Change in
value of US
Simulated US$ Value
Actual US imports from
US imports of US import
HS 2 Product label imports from IND IND in
from IND from IND in
(US$ Mn) simulation
(US$ Mn) simulation
compared to
(US$ Mn)
actual value

Articles of stone, plaster, cement,

68 269.94 290.98 21.04 7.8%
asbestos, mica or similar materials
70 Glass and glassware 222.54 299.79 77.25 34.7%
Natural or cultured pearls, precious
71 or semi-precious stones, precious 4,334.19 9,095.41 4,761.22 109.9%
metals, metals clad
Vehicles other than railway or
87 tramway rolling stock, and parts and 928.84 1,047.56 118.72 12.8%
accessories thereof
Optical, photographic,
cinematographic, measuring,
90 6.86 7.64 0.78928 11.5%
checking, precision, medical or
surgical
Arms and ammunition; parts and
93 35.39 38.47 3.09 8.7%
accessories thereof
Furniture; bedding, mattresses,
94 mattress supports, cushions and 369.12 417.24 48.12 13%
similar stuffed furnishings
Miscellaneous manufactured
96 110.97 132.22 21.25 19.1%
articles

Source: Author’s calculation based on TINA (UNESCAP)

The simulation results (Table 4.8) highlight significant growth in various industry sectors following
tariff reductions. The most remarkable increase is observed in the precious metals and gemstones
sector (HS 71), where India's exports to the US more than doubled, rising by 109.9% and adding US$
4.76 billion. Glass and glassware (HS 70) also witness substantial growth of 34.7%, reflecting increased
demand for Indian exports in this category. The vehicles sector (HS 87) grew by 12.8%, while furniture
and bedding (HS 94) expanded by 13.0%, reinforcing India's role in home furnishing exports. Articles

46
of stone, plaster, and cement (HS 68) increased by 7.8%, and arms and ammunition (HS 93) grew by
8.7%. The optical and medical instruments sector (HS 90) shows an 11.5% rise, while miscellaneous
manufactured articles (HS 96) record a 19.1% increase. These trends suggest that tariff liberalization
could significantly enhance India's export presence across diverse manufacturing and high-value
sectors in the US market.

4.4 Conclusion:
The shifting trade dynamics resulting from US tariff impositions on Canada and Mexico present a
strategic opening for India to expand its export footprint in North America. As US exports to these
countries decline across multiple sectors, India has the opportunity to step in, particularly in refined
petroleum, vehicle components, plastics, and chemicals. While India may not fully replace US
suppliers, it can gain a competitive edge through cost advantages, trade agreements, and supply chain
efficiencies. However, to maximize these gains, Indian exporters must focus on enhancing production
capacity, meeting stringent quality standards, and ensuring timely deliveries.

The simulation results underscore the substantial benefits that an India-US FTA could bring,
particularly in enhancing India's export potential across multiple sectors. Tariff reductions would drive
significant growth in India's exports of industrial goods, consumer products, agricultural commodities,
and high-value manufactured items. Sectors such as organic chemicals, textiles, and apparel stand to
gain considerably, with apparel exports alone witnessing an increase of over 50%. Similarly, the
removal of trade barriers would boost India's exports of precious metals, vehicles, furniture, and
machinery, further strengthening its industrial footprint in the US market. These findings highlight the
potential of an India-US FTA to deepen bilateral trade relations, diversify India's export basket, and
enhance its competitiveness in global markets. By addressing non-tariff barriers and facilitating
smoother trade flows, the agreement could catalyze long-term economic cooperation between the
two nations.

India’s trade strategy lies in balancing market access with domestic industry protection. While tariff
realignment with the US can unlock new opportunities, rushing into liberalization without sectoral
safeguards could expose Indian exporters to intense competition. A measured approach—opening up
non-sensitive tariff lines, strengthening high-risk industries, and pushing for services sector gains—
will ensure India maximizes trade benefits while securing its long-term economic interests.

47
9, 2nd Floor, Scindia House, Connaught Circus,
New Delhi-110001, India
Phone: +91 11 40727272 | Email: info@tpci.in
Web: www.tpci.in