U.S. Auto Tariffs Pose Minimal Risk To India's Automobile Sector: GTRI

(MENAFN- KNN India) New Delhi, Mar 28 (KNN) In a comprehensive analysis released on Thursday, the Global Trade Research Initiative (GTRI) assessed the potential impact of the United States' newly announced 25 percent import duty on completely built vehicles and auto parts, concluding that the measure presents limited challenges and potential opportunities for India's automotive industry.

U.S. President Donald Trump's March 26 announcement of sweeping tariffs, set to take effect on April 3, initially raised concerns about international trade dynamics.

However, GTRI founder Ajay Srivastava provided a nuanced perspective that suggests India's automotive export sector remains largely resilient and potentially strategically positioned.

The statistical evidence supports a measured outlook. India's passenger car exports to the United States in 2024 amounted to a mere USD 8.9 million, representing just 0.13 percent of the country's total vehicle exports.

Similarly, truck exports to the U.S. stood at USD 12.5 million, accounting for only 0.89 percent of global truck export volumes, indicating minimal direct vulnerability.

The auto parts segment presents a more complex landscape. While India exported USD 2.2 billion worth of auto parts to the U.S. in 2024-comprising 29.1 percent of its global auto parts exports-the broader context reveals a potentially advantageous scenario.

The United States imported USD 89 billion in auto parts globally in 2024, with Mexico and China being the primary suppliers.

The uniform 25 percent tariff across all exporting countries effectively creates a level competitive field.

Srivastava suggests that India could strategically leverage this development.

The nation's competitive advantages in labor-intensive manufacturing and favorable import tariff structures (ranging from zero to 7.5 percent) position it to potentially increase market share in the U.S. automotive components market over time.

The analysis strongly cautions against reactive trade policies. Drawing a historical parallel with Australia's automotive industry, Srivastava emphasised the risks of precipitous tariff reductions.

When Australia lowered its import tariffs from 45 percent to 5 percent in the late 1980s, it ultimately undermined its domestic manufacturing capabilities-a scenario India must meticulously avoid.

Contextualising the potential impact, the automotive sector contributes nearly one-third of India's manufacturing GDP.

The GTRI's recommendation is clear: maintain strategic stability and view the U.S. tariff announcement as a potentially neutral or mildly advantageous long-term development.

The research underscores a critical message for policymakers and industry stakeholders: measured, strategic responses are paramount.

Rather than engaging in immediate retaliatory measures, India should focus on leveraging its inherent manufacturing strengths and exploring emerging market opportunities created by these international trade dynamics.

(KNN Bureau)

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