US tariffs offer India a trade opportunity, auto sector among key beneficiaries: NITI Aayog

Time of India

15 hours ago

New Delhi:
Higher tariffs imposed by the United States on major trading partners such as China, Canada and Mexico could open a strategic trade window for India, with sectors including automobiles, auto components, and electrical machinery poised to benefit, according to a new report by NITI Aayog,
Economic Times
reports.
The report, released in the latest edition of the government think tank's Trade Watch Quarterly, outlines how India could gain competitiveness in 22 of the top 30 product categories (at the HS-2 level) exported to the US. Notably, several of these categories include automotive-related goods and electronics, where India has been steadily scaling up production capacity under various incentive schemes.
This shift follows steep import tariffs introduced by the Trump administration—30 per cent on Chinese goods, 35 per cent on Canadian, and 25 per cent on Mexican imports—which have significantly altered trade dynamics. For Indian exporters, this presents an opportunity to expand market share in the world's largest consumer economy, the report said.
'India's relative tariff advantage vis-a-vis major competitors presents a strategic window to expand market share in the US market, especially in sectors such as pharmaceuticals, textiles, and electrical machinery,' NITI Aayog stated. The analysis also highlights opportunities for India's mineral fuels, plastics, furniture, and seafood exports—industries tied closely to broader manufacturing and supply chains, including the auto sector.
Auto and Electronics Could Gain
The evolving tariff regime could particularly support Indian manufacturers of EV components, semiconductors, and other electrical systems used in automotive production. As global automakers diversify sourcing away from China, India may emerge as a cost-competitive alternative for US-bound automotive supplies.
India's growing EV ecosystem—supported by schemes like FAME and PLI—places it in a strong position to supply components and systems for the American auto market, provided trade terms are favourable. However, the report warns that any gains will depend on swift, sector-specific policy responses from the Indian side.
Strategic Trade Talks Underway
Amid this changing landscape, a delegation from India's commerce ministry has arrived in Washington for another round of talks on a proposed bilateral trade agreement. The discussions aim to finalise an interim deal by the fall, with a full agreement potentially materialising thereafter.
The US is seeking duty reductions on various industrial and agricultural goods, including automobiles (especially EVs), while India is pushing for better access for its labour-intensive exports such as textiles, gems, footwear, and auto parts. India is also seeking relief from steep
US tariffs
on its steel (50per cent ), aluminium (50per cent ) and automobile exports (25per cent ).
The talks follow earlier rounds held from June 26 to July 2 and are taking place ahead of a new US deadline of August 1 for implementing additional tariffs on multiple countries, including India.
Tariff Advantage and Challenges
According to NITI Aayog, India's competitiveness remains steady in six key product categories—segments that account for nearly one-third of its US-bound exports. However, India enjoys a relative edge in 78 products that represent over half of its total exports to the US.
Still, challenges remain. In six categories, India faces slightly higher average tariffs than competitors, a gap that could be closed through negotiations. Furthermore, in 17 of the top 100 products exported to the US, India's position remains unchanged due to the absence of any tariff differential.
Policy Recommendations
To fully leverage the shifting trade environment, NITI Aayog has called for the expansion of PLI schemes into labour-intensive sectors such as leather, furniture and handicrafts. It also recommended lowering industrial electricity tariffs through rationalised cross-subsidies and increased renewable energy use—measures aimed at reducing production costs.
The report further urged India to explore a services-focused trade deal with the US, following the India–UK model, including provisions for digital trade in IT, finance, and professional services.
As India and the US continue negotiating, the outcome could reshape trade flows across multiple sectors—including automobiles—offering Indian exporters a vital competitive edge amid rising global protectionism.