Impact of reciprocal tariffs on India’s chemical sector is expected to be minimal: CareEdge

Jefferies flagged concerns over the newly imposed 27% tariff for Indian specialty chemical firms warning that short-term earnings could be negatively impacted

US President Donald Trump issued an executive order on reciprocal tariffs, imposing additional ad valorem duties ranging from 10 per cent to 50 per cent on imports from all trading partners on April 2, 2025.

According to CareEdge, India’s aggregate merchandise exports to the US stood at $77.5 billion compared to our imports from the US at $42.2 billion during FY24,. Out of India’s total exports to the US, the sectors in descending order of value are Electronics, Textiles, Pharmaceuticals, Gems and Jewellery, Agricultural products, Chemicals and Automobiles and parts.

Till now, the US had been charging an average tariff of ~3.50% on imports of goods from India w.r.to abovesaid sectors, which is now being increased uniformly to 26% in the form of reciprocal tariff.

India’s overall exports of chemicals to the US are very low, which means the impact of reciprocal tariffs would be limited. India's total chemical exports stand at $19.23 billion. Of this, India’s chemical exports to US stands at $ 3.27 billion, which is 17 per cent of the total chemical exports.  Further, apart from India, China is the major exporter of chemicals to the US and a higher reciprocal tariff is levied on China.

Accordingly, the impact of reciprocal tariffs on the chemical sector in India is expected to be minimal. Some segments of the chemical sector could be beneficiaries of relatively higher tariffs on China compared to India, particularly in the US market. However, China is the world’s lowest-cost manufacturer and exporter of the majority of chemicals. Due to the reciprocal tariffs imposed by the US, China could even dump chemicals in India and other countries, which may have an indirect negative impact on India’s chemical sector.

According to a report released by global brokerage firm Jefferies, these tariffs are expected to have a limited impact on major Indian export sectors. The report emphasizes that there is no immediate threat to these key industries.

In the chemicals space, Jefferies flagged concerns over the newly imposed 27 percent tariff, especially for Indian specialty chemical firms with significant exposure in the US While the sector’s long-term growth prospects remain intact, and the brokerage warned that short-term earnings could be negatively impacted. Companies identified as more exposed to these risks include Navin Fluorine, with roughly 25 percent of revenue coming from the US; PI Industries, with 20 percent exposure; SRF, at 7 percent; and UPL, which derives between 11 percent and 13 percent of its revenues from the US market.

Reciprocal tariff imposed by the US on other nations who are India's major competitors in most of the above sectors is higher than us - Vietnam at 46 per cent, Bangladesh at 37 per cent, China at 34 per cent, Taiwan at 32 per cent, Indonesia at 32 per cent and Pakistan at 29 per cent, which, according to rating agency, augurs well for key export sectors of India.

The imposition of high reciprocal tariffs by the US on other competing nations raises the possibility of increased dumping by those nations in India, as well as in other export markets, which could negatively impact certain sectors, CareEdge predicts.