Indian Auto Industry To Suffer From Trump's Reciprocal Tariff? Explained

United States President Donald Trump has announced that the US will impose reciprocal tariffs on several countries, including India. He stated that the tariffs on countries will be based on the amount each country charges on the US goods. The decision is viewed as an escalation of the international trade war and the economists suggest that the move can have adverse effects on the domestic market. Potentially, the impact will be seen in the form of inflation. However, experts believe that the auto industry will experience limited effects from this move.

President Donald Trump's Reciprocal Tariff

US President Donald Trump has ordered his administration to consider imposing reciprocal tariffs on various trade partners. In his statement in the Oval Office, Trump said, "I've decided, for purposes of fairness, that I will charge a reciprocal tariff, meaning whatever countries charge the United States of America." He added, "In almost all cases, they're charging us vastly more than we charge them, but those days are over."

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Furthermore, the US President singled out India for the tariff policies related to the United States. He said, "Traditionally, India is right at the top of the pack pretty much. There are a couple of smaller countries that are actually more, but India charges tremendous tariffs."

Effects Of Trump's Reciprocal Tariff On Indian Auto Industry

Puneet Gupta, a director at S&P Global Mobility - India and ASEAN in a statement to NDTV Profit clarified that the Original Equipment Manufacturers (OEMs) in India will largely remain insulated from the effects of reciprocal tariffs, this is because of localisation in manufacturing and sales. Furthermore, the Indian auto industry has minimal exports to the US. However, Royal Enfield, a motorcycle manufacturer under the umbrella of Eicher Motors Ltd. may suffer at the hands of the reciprocal tariffs as the US is a major market for the 650 cc models.

On the other hand, the auto ancillary industry might see a larger impact because of the imposition of reciprocal tariff policies. It is to be noted that the US is a significant export market for component manufacturers like Sansera Engineering Ltd., Suprajit Engineering Ltd., Balkrishna Industries Ltd., Sona Comstar, and Motherson Group. As per a statement given to NDTV Profit, Varun Baxi, research analyst at Antique Stock Broking Ltd. believes that the component manufacturers are "exploring workarounds to sidestep the US tariffs." This is possible by routing exports through various other countries where they may have operations.