US tariffs on auto, auto parts to have limited impact on India
Of the 16 million automobiles bought by US customers in 2024, 8 million or 50 per cent were imported and in the case of automobiles assembled in the US, 50 to 60 per cent are imported components;
Chennai: President Donald Trump has announced a 25 per cent tariff on automobiles imported into the country from April 3 and auto components in May. The impact will be insignificant on automobile exports as the US accounts for less than 1 per cent of India’s exports and that on $2.2 billion exports of auto components will be limited, considering the tariff is also applicable for other suppliers like Mexico and China.
Of the 16 million automobiles bought by US customers in 2024, 8 million or 50 per cent were imported and in the case of automobiles assembled in the US, 50 to 60 per cent are imported components.
Trump’s tariff to reduce imports will not affect Indian companies much as the US accounts for just 0.13 per cent of the total exports valued at $8.9 million. According to SIAM, the tariffs will not affect Indian auto companies.
Truck exports to the US stood at just $12.5 million, representing 0.89 per cent of India’s global truck exports. However, the US accounts for $28.2 million or 11.4 per cent of India’s exports of car chassis fitted with engines.
“While US tariffs will not have much impact on the Indian auto industry, lowering of duties as part of the Bilateral Trade Agreement being discussed by both countries would be counterproductive,” said GTRI.
“When Australia reduced its import tariffs from 45% to 5% in the late 1980s, it paved the way for the eventual collapse of its domestic auto manufacturing industry. With the Indian auto sector contributing nearly one-third of the country’s manufacturing GDP, any similar misstep must be avoided,” said Ajay Srivastava, founder, GTRI.
In the case of auto components, India exported $2.2 billion worth products to the US in 2024, comprising 29.1 per cent of its global auto part exports. The US imported $89 billion worth of auto parts globally last year, with Mexico accounting for $36 billion, China for $10.1 billion, and India for just $2.2 billion. Since the 25 per cent tariffs apply across the board, all exporting countries face the same hurdle and provide India a level-playing field.
Further, it will not be possible for the US to immediately shift auto component makers into the country as it will take years and billions of dollars. Even the US plans to impose tariffs on auto components in May or later.