U.S. President Donald Trump celebrated ‘Liberation Day’ with pomp and show as he stuck to his guns with the blanket 25% tariff on vehicles and components made outside the country. Trump has been insisting that this new policy will help America generate $6 trillion in investments, but what one tends to forget is that the tariffs have been and will always be footed by private companies and consumers, not by the government. To transform the U.S. into a manufacturing powerhouse, we explore the impact of the 25% tariffs, set to take effect on May 3, 2025, on India’s automobile component industry.
No additional 26% tariffs on automobiles and parts
The White House announced a 26% reciprocal tariff on India, but this does not include the automobile sector including the OEMs and component industry. Indian auto players will only face the 25% tariffs that were earlier announced by Trump. Automotive Component Manufacturers Association of India (ACMA) President and Chairperson and Managing Director (CMD) Subros Ltd Shradha Suri Marwah said, “Autos and auto parts and steel and aluminium articles, already subject to Section 232 tariffs at 25%, announced earlier in Trump’s order on March 26, 2025, are not covered in the latest order.”
Rough waters for auto component industry
The 25% import tariff will unruffle the feathers of the auto component sector, but this could also be an opportunity for India. According to ACMA, India exports around $6.8 billion in automobile components to the North American market. Initially, this may pinch the companies, but as the 25% tariff is standard across the globe, it is highly unlikely that the manufacturing facilities would shift out of India. Marwah said, “ACMA understands the intent of the US administration to boost domestic manufacturing and address trade imbalances. ACMA remains hopeful that the ongoing bilateral negotiations between the Indian and US governments will lead to a balanced resolution that benefits both economies.”
Automobile analysts have a different take on the tariffs believing this could be an opportunity to storm the U.S. electric vehicle segment. Saurabh Agarwal, Partner & Automotive Tax Leader EY India, said, “With US automotive tariffs rising, India’s electric vehicle sector has a prime opportunity to capture a larger share of the US market, especially in the budget car segment. China’s 2023 auto and component exports to the US stood at $17.99 billion, while India’s were only $2.1 billion in 2024, highlighting the potential for growth. To accelerate this, the government should enhance the PLI scheme by including more auto components, opening it to new players, and extending it by two years.
