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The Indian auto components industry, which is dependent on the global supply chain, will be affected the most. The new tariffs could cause major disruptions, increasing input costs for US-based automakers and reducing demand for Indian auto parts
While India’s direct exposure to US tariffs is limited, cumulative effects through supply chains and shifting market dynamics are likely. (Reuters Image)
Donald Trump’s announcing 25% tariff on automobile imports on Wednesday could boost US production but would affect the global supply chain of automakers, impacting India. “This will continue to spur growth. We’ll effectively be charging a 25% tariff,” Trump told reporters.
Trump insisted that the measure will encourage more factories in the US and end a “ridiculous” supply chain stretching across the US, Canada and Mexico.
The tariffs encompass not just fully assembled vehicles but also critical components such as engines, transmissions, powertrain systems and electrical assemblies.
The measure is expected to yield around $100 billion annually, reflecting a notable shift in the US trade policy, according to the White House.
What Does It Mean For Indian Automakers?
India auto exports to the US remain relatively low compared to Mexico, Canada and Japan. However, the secondary effects of the US tariffs may have significant implications for India’s automobile sector.
Most hit would be the Indian auto components industry, which is highly dependent on the global supply chain, and has emerged as a key supplier to the US car manufacturers.
In the financial year 2024, India exported auto components worth $21.2 billion, contributing to the global auto component market, which stands at $1.2 trillion. In 2023, the figure was nearly $1.5 billion.
The new tariffs could cause major disruptions, increasing input costs for US-based automakers and reducing demand for Indian auto parts.
JATO Dynamics India President and Director, Ravi G Bhatia said India has not been singled out with Trump’s tariff, which also applies to the country’s competitors. “This step will hit for sure but it is not a ‘Tsunami’. It is not too much of a big hit and Indian suppliers will work out how to retain their market share in the US,” he said, adding as the situation is developing it is too early to jump into a conclusion.
Tata Motors does not have direct exports to the US, but its subsidiary Jaguar Land Rover (JLR) has a strong foothold in the US market. According to JLR’s FY24 annual report, the US accounted for 22% of its overall sales. In FY24, JLR sold nearly 400,000 vehicles worldwide, with the US being one of its top markets, the report added. The company’s vehicles sold in the US are primarily manufactured in the UK and other international plants, which will now be subject to a 25% tariff.
Eicher Motors, the maker of Royal Enfield motorcycles, could also feel the impact, as the US is an important market for its 650cc models.
Samvardhana Motherson International Ltd, which is a leading auto component supplier to Tesla and Ford, has a strong presence in both the US and Europe. However, its manufacturing facilities in these regions provide some protection from tariff-related disruptions.
Sona BLW Precision Forgings (Sona Comstar), which supplies differential gears and starter motors, generates 66% of its revenue from the US and Europe. Due to trade uncertainties, the company has been expanding into China, Japan, and South Korea, aiming that these markets could contribute over 50% of its revenue within five years.
Other key component makers with significant export exposure include Bharat Forge, Sansera Engineering Ltd, Suprajit Engineering, and Balkrishna Industries.
Tariff Impact On Global Supply Chain
The global automobile landscape would take a hit after the 25% tariff announcement. Countries, which are heavily dependent on the US automotive supply chains – Canada, Mexico, Germany, Japan and South Korea – could see their trade and production disrupted.
While India’s direct exposure to US tariffs is limited, knock-on effects through supply chains and shifting market dynamics are likely. Indian suppliers dependent on the US must adapt quickly and pivot to other markets and expand their domestic footprints.
How The World Is Reacting?
Canada: Newly-elected Prime Minister Mark Carney issued a strong rebuke, describing Trump’s auto tariffs as a “direct attack” on Canada and warning of economic fallout for American consumers. He also said Canada would assess the details of Trump’s executive order before considering retaliatory actions.
Japan: Prime Minister Shigeru Ishiba did not rule out countermeasures against the tariff, stressing Japan’s significant economic contributions to the US. Highlighting Japan’s investments in the US auto sector, Ishiba stressed that Japanese companies provide employment and pay high wages, making it unjustifiable to impose blanket tariffs. He said “it not right to treat all countries in the same way”.
United Kingdom: The Society of Motor Manufacturers and Traders (SMMT) has slammed Trump’s tariffs, warning they will harm businesses and consumers on both sides of the Atlantic. SMMT chief executive Mike Hawes called the move “disappointing” but “not surprising”, describing it as a setback for the long-standing UK-US trade relationship.
European Commission: It is expected to discuss countermeasures in the coming days, as the bloc has historically taken a firm stance against the protectionist policies of the US.
What Next?
A US delegation led by assistant trade representative for South and Central Asia Brendan Lynch is in India for a round of discussion from March 25 to March 29. The talks are part of a broader trade agreement.
According to government sources, India “understands the American domestic compulsion. They need to get back those manufacturers who had left America for other countries like China…America has sent its delegation here which shows US wants to actively engage with us. America cannot openly show that they are going soft on us. So, India expect things to be more positive after a few weeks.”
The timing of the visit is critical as the reciprocal tariffs announced by Trump will be effective from April 2. The current negotiations aim to improve market access, lower trade barriers, and increase supply chain collaboration between the two nations.
India and US are targeting completion of the first phase of Bilateral Trade Agreement by autumn 2025, with a shared goal of expanding the trade between the two countries to $500 billion by 2030.