There’s been a lot of talk on how US President Donald Trump’s reciprocal tariff will affect the Indian automobile sector. He categorically mentioned, “Traditionally, India is right at the top of the pack pretty much.” So it all doom and gloom for the original equipment manufacturers (OEMS) in India. Not quite.
Ripple effect of reciprocal tariff on automobile sector
Trump recently made his stand clear stating, “I’ve decided for purposes of fairness that I will charge a reciprocal tariff. It’s fair to all. No other country can complain.” However, this will not significantly impact the Indian automobile sector due to the localisation of components and limited exports to the US market.
Gaurav Vangaal, Associate Director of LVP Forecasting at S&P Global Mobility, told Express Drives, “The Indian four-wheeler automobile sector is unlikely to be affected by reciprocal tariffs, as India has not exported any vehicles to the US since the Ford EcoSport.”
A key question making the rounds is whether a cut in import tariffs by the Indian government will impact domestic players. This debate mainly revolves around the potential entry of Tesla into the Indian market. In reality, major mass-market players like Maruti Suzuki, Tata Motors, and Mahindra are unlikely to be affected by this move, as the tariff reduction would apply only to directly imported vehicles, which will remain in the luxury segment with higher prices.
Trump’s take on reciprocal tariff
According to the Trump administration, its allies have been following unfair trade policies. According to Nomura analysts, India’s weighted average effective tariff on US exports is significantly higher than the US’s tariff rate on Indian exports. The tariff rate on US goods in India is around 9.5 per cent, which is quite high when compared to the US’ 3 per cent tariff rate.
Based on the tariffs in India, Trump said, I remember when Harley Davidson couldn’t sell their motorbikes in India as the tariff was so high.” According to him, with the new tariff plan, “They can build a factory here, a plant or whatever it may be.” This will also lead to job creation in America.
