The new 25 per cent tariff on goods imported from India has come into effect from August 1, 2025, and is likely to disrupt the pricing strategies and supply chains in the short term.
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Check Offers The recently announced tariffs on India by US President Donald Trump will have an impact on the domestic auto component sector. The new 25 per cent tariff on goods imported from India has come into effect from August 1, 2025, and is likely to disrupt the pricing strategies and supply chains in the short term. Moreover, the US will impose an unspecified “penalty” for India’s purchase of Russian oil and military equipment, which is expected to disrupt the pricing dynamics further.
27% of India’s auto components exported to US
India’s auto components sector stands at $111 billion, and the US accounted for 27 per cent of India’s auto component exports in FY2025 at $9.5 billion, according to the Automotive Components Manufacturers Association (ACMA). In contrast, imports from the US to India stood at just 7 per cent.
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The new tariffs will not only increase prices but will also withdraw any cost-competitiveness that the Indian suppliers had over other countries. While India has been imposed with a 25 per cent tariff, other Asian countries face a much lower tariff, with Japan at 15 per cent, Vietnam at 20 per cent, and Indonesia at 19 per cent.
That said, the biggest auto component exporters to the US remain Mexico and Canada, which remain exempt from tariffs under the US-Mexico-Canada Agreement (USMCA). This offers zero-tariff access to the US market for auto components, as long as they meet local requirements.
Indian auto suppliers play a pivotal role in the US supply chain, including drivetrain, engine, chassis, and electric vehicle-related systems. Several companies also source software systems from Indian suppliers.
Reports suggest certain Indian automotive components players are considering investments in tariff-neutral zones like Mexico to ensure continued supply to the US. Meanwhile, most players will be cautious with fresh investments till there is more clarity on the tariff structure going forward. The Indian auto components sector is largely made up of micro, small, and medium enterprises (MSMEs), making them sensitive to global demands.
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First Published Date: 01 Aug 2025, 14:34 pm IST
