Trump's 25% auto tariffs: Will it impact the Indian industry?

US President Donald Trump has once again made a tariff-related announcement, this time on automobiles, driving strong reactions from the industry. The president on Thursday said that the US would impose 25 per cent tariffs on all vehicles and foreign-made auto parts imported into the country.

The new tariffs, effective from April 3, could add thousands of dollars to the cost of an average US vehicle purchase and impede car production across North America. Introducing levies on imported cars and their components is expected to revive the US automobile industry.

Trump said the duties could be a net neutral or even good for Tesla, adding that its CEO, and his close ally, Elon Musk, did not advise him regarding auto tariffs.

In a post on X following the news, Musk said the tariffs would also affect Tesla.

“This will affect the price of parts in Tesla cars that come from other countries,” he wrote in another post on X. “The cost impact is not trivial.”

How will it affect India?

While India’s direct automobile export to the US is meagre compared to countries like Japan, Mexico and Canada, the secondary effects of Trump’s tariffs are expected to impact the Indian industry.

Reports indicate that in 2023, India’s auto parts exports to the United States were valued at around $1.5 billion.

However, the introduction of new tariffs could significantly impact this trade, raising production costs for US automakers and potentially lowering demand for Indian auto parts. As a result, suppliers might struggle with shrinking profit margins, either absorbing the higher costs or seeking alternative export markets.

Which companies will be hit?

Many Indian auto companies started to feel the ripples of Trump’s tariffs as shares went down following the Potus’ announcement.

Tata Motors does not directly export its cars to the US, but its subsidiary Jaguar Land Rover (JLR) has taken a hit. The shares of Tata Motors was down by 5 per cent on Thursday.

At the same time, Eicher Motors, the manufacturer of Royal Enfield motorcycles, may also be affected, as the US represents a key market for its 650cc models.

With inputs from agencies