Hello Mumbai Business Desk 

In first part of this series, we examined the Financial Market Effects and the Overall Impact on the Indian Economy of the recent U.S. tariff policies. In this continuation, we shift focus to two critical dimensions: the global trade context and the MSME (Micro, Small, and Medium Enterprises) sector, which together represent the human and structural impact of tariffs on India’s growth story.

1. Global Context: The U.S. Tariff Shadow on Indian Exports
The United States continues to be one of India’s largest export destinations, accounting for nearly 17% of total merchandise exports. In FY 2023–24, India’s total exports stood at USD 451 billion, out of which USD 77 billion went to the U.S.

Tariffs have directly impacted steel, aluminium, textiles, gems & jewellery, and pharmaceuticals.Steel & Aluminium
From August 2025 onwards, the steel and aluminium sector continues to face strong headwinds in the U.S. market. The additional tariffs of 10–25%, imposed earlier, remain in place, keeping Indian exports at subdued levels. While the sector once exported USD 2.3 billion to the U.S. in FY 2018, exports have stabilized much lower at around USD 1.5 billion. Buyers in the U.S. have increasingly shifted toward suppliers in Mexico and Canada, whose preferential agreements allow them to bypass such steep tariffs. This has left Indian producers struggling to regain their lost competitiveness in North America.

Textiles & Apparel
The most significant shock from August 2025 has come in the textiles and apparel sector. Following the imposition of a steep 50% tariff on Indian goods from August 27, 2025, analysts project a 5–10% revenue decline in FY 2025–26, particularly in-home textiles, a strong export category for India. Already weakened by earlier duties of 7–12% and high input costs that reduced exports to USD 6.9 billion in FY 2024 (down from USD 8.1 billion in FY 2022), the sector is bracing for further contraction. India’s U.S. market share, which had already slipped from 9.5% to under 8%, is now under even greater threat from competitors like Vietnam and Bangladesh, who continue to offer lower-cost alternatives without such tariff barriers.

Gems & Jewellery
The gems and jewellery industry is also seeing clear signs of stress post-August 2025. Recent data shows that in August 2025 alone, diamond exports fell by 6% to USD 972 million, while studded gold jewellery exports dropped 7.7%. This continues the decline from USD 11.1 billion in FY 2022 to USD 9.5 billion in FY 2024. Despite this, there is a silver lining—overall gold jewellery exports rose 26% during April–August 2025, indicating that certain product categories are managing to offset tariff-driven losses. Still, India’s labour-intensive jewellery exports remain less competitive compared to Thailand and Turkey, who are filling the gap in the U.S. market.

Pharmaceuticals
The pharmaceuticals sector, one of India’s most vital export pillars, has been directly hit by the 50% tariff imposed from August 27, 2025. With exports to the U.S. valued at USD 9.8 billion in FY 2024, the sector faces a projected 5–10% revenue decline in FY 2025–26. Since many Indian pharma companies derive 40–50% of their revenue from the U.S. market, the new tariff poses a serious challenge. While pharmaceuticals remain relatively resilient due to the essential nature of generics, exporters are already absorbing higher costs and facing compliance pressures. To mitigate the damage, firms are actively expanding into Russia, the Netherlands, and Brazil, but diversification will take time to meaningfully offset the losses.

In short, tariffs altered the competitiveness matrix, directly causing the “before–after” declines in each sector.

2. The SME and MSME Angle

MSMEs form the backbone of India’s export ecosystem, contributing nearly 45% of overall exports and employing more than 110 million people. Their exposure to U.S. tariff shocks is both direct and indirect.
Export dependency
Thousands of MSMEs supply directly to U.S. buyers or indirectly to large Indian exporters. For instance, textile clusters in Tirupur, Surat, and Ludhiana reported 15–20% order reductions after tariff hikes, hitting both employment and cash flow.

Financing risks
MSMEs rely heavily on bank and NBFC credit. A fall in revenue directly increases the risk of NPAs (Non-Performing Assets). According to RBI data, MSME NPAs already stood at 8.4% in FY 2023, and tariff-induced stress could push this figure to 10%+ in FY 2025 if conditions persist.

Conclusion

While India’s macroeconomic resilience helps absorb some of the tariff shock, the impact is disproportionately heavy on MSMEs and labour-intensive sectors such as textiles, gems & jewellery, and parts of the metals trade. The numbers reflect a stark before-and-after scenario—nearly a USD 10–12 billion dip in export revenues across just a few key sectors—combined with rising risks for small enterprises that lack the buffers of larger corporations.
In the next and final part of this series, we will focus on the Prime Minister’s perspective and the government’s actions in navigating this tariff situation. We will also examine the geopolitical and economic angles, exploring how India can safeguard its exporters, build resilience, and strategically reposition itself in an increasingly protectionist global environment.