US tariffs threaten India’s diamond, shrimp, and textile exports, warns Crisil

New Delhi: India’s diamond polishing, shrimp, home textile, and carpet industries are likely to see their revenues hit harder by the United States’ latest tariff hike, making exports to America unviable for many Indian companies, Crisil Ratings said.

The US has imposed a 25% tariff on Indian goods as a penalty for importing crude oil from Russia, effective 27 August, in addition to the existing 25% reciprocal tariff.

The impact of these tariffs will vary across sectors, depending on their US market exposure, ability to pass on costs, and competitive position relative to other exporting countries, Crisil said in a credit alert.

The rating agency also warned of a possible “second-order effect” from a slowdown in US demand and shifting global trade dynamics due to disparate tariffs across nations.

That said, strong corporate balance sheets, potential bilateral trade agreements with other countries, and the possibility of support from the Indian government for the impacted sectors could mitigate the impact to some extent, it added.

The US currently accounts for roughly 20% of India’s merchandise exports, Crisil said. The sectors most vulnerable to the US’s tariffs include diamond polishing, shrimp, home textiles, carpets, ready-made garments, chemicals, agrochemicals, capital goods, and solar panel manufacturing, it added.

About 25% of the revenue of Indian diamond polishers in 2024-25 came from US exports. But the tariffs along with weak demand for natural diamonds in the US threaten to significantly dent revenue and compress already thin operating margins for the sector, Crisil said.

It added that retailers in the US have shown little willingness to absorb higher costs, which would extend working capital cycles as inventory would likely be cleared more slowly and payments be delayed.

As for shrimp exporters, a sector that derives nearly half its revenue from the US, Crisil said they face some of the highest tariff burdens globally, with countervailing and anti-dumping duties already in place.

The US’s new tariffs risk reducing shrimp export volumes further, especially given stiff competition from Ecuador, a lower-tariff competitor. “The sector’s thin margins will be squeezed even more,” Crisil said.

On textiles, chemicals, and other sectors

On home textiles and carpets, the agency said the US’s new tariffs will cause sharp revenue and profit declines as the discretionary nature of these products limits the ability of retailers to pass through the additional costs to consumers. The US accounts for about 60% of India’s home textile exports and 50% of carpet shipments, Crisil said.

The ready-made garments sector, which derives 10-15% of its revenue from exports to the US, risks losing its competitiveness against manufacturers in China and Vietnam, according to the agency’s report.

Agrochemical exporters, who earn 11-12% of their revenue from the US, face stiff Chinese competition in alternative markets, while the specialty chemicals sector (5% in US revenue) is still recovering from profitability pressures, Crisil added.

Capital goods manufacturers (15% in US revenue) can partially absorb costs but could see new orders hit due to competition from Mexico and others.

Solar panel manufacturers earn 10-12% of their revenue from the US but growing domestic demand may soften the blow of the US tariffs, Crisil said.

Pharmaceuticals and smartphones, despite significant US trade, remain exempt from the tariffs for now, while tariffs on steel, aluminum, and some auto components are unchanged.

The US’s overall tariffs may lead to broader changes in US demand, with inflation concerns potentially lowering discretionary spending, Crisil said.

Additionally, global trade realignments due to multiple tariff impositions could see competing countries redirecting exports to India, impacting local industries until markets rebalance, it added.