Trump levies 25% tariff on all cars and car parts imported to US, threatens slowdown-hit Indian auto component industry

US President Donald Trump's administration has imposed a 26 per cent reciprocal tariff on India. It comes as a major blow to India's export sector and is expected to affect multiple industries significantly. One of the major impacted sectors by this 26 per cent reciprocal tariff is going to be the Indian automobile component industry.

With the new tariff regime enforced, made-in-India automobile components entering the US will now attract a minimum 26 per cent levy, beginning April 9. This comes after another blow when Donald Trump announced a 25 per cent tariff on all cars and car parts imported to the US, effective from April 2.

What new tariff mean for Indian automakers

The new 25 per cent levy came into effect on April 2 and is applicable both to finished cars shipped into the US and car parts imported for vehicles assembled there.

The impact on Indian vehicle manufacturers is expected to be minimal. India’s passenger and commercial vehicle exports to the US are reportedly as low as 0.13 per cent and three per cent, respectively, out of its total exports. India’s passenger vehicle exports to the US were worth $8.9 million in 2024, or just 0.13 per cent of its total car exports of $6.98 billion, as per the data revealed by the Global Trade Research Initiative and Directorate General of Commercial Intelligence and Statistics (DGCI&S)

Tata Motors is expected to bear an indirect impact of Trump’s tariff as the US market comprised 33 per cent of the total sales volumes of its luxury car arm Jaguar Land Rover in the first nine months of FY25, and around 23 per cent of its revenue in FY24. In a nutshell, no vehicle production shift is expected, as the US is not a key market for Indian-made passenger vehicles.

Indian auto component makers to bear the brunt

When it comes to the impact of the new tariff of Donald Trump's administration on the Indian automotive sector, the auto component makers will bear the most brunt. High exposure of the Indian auto component industry to US exports results in high vulnerability. The US was India's largest auto component export market, accounting for around 32 per cent of the country's total auto parts exports worth around $21.2 billion in FY24.

India’s auto component exports to the US comprise one-third of the total industry exports of $21.2 billion. Major Indian auto component manufacturers making key parts such as precision forging, drive systems, and electric powertrain parts; face serious competitive pressure from local and near-shore suppliers.

Speaking to HT Auto, Harshvardhan Sharma, Head of Auto Retail Consulting Practice at Nomura Research Institute, said that the direct vehicle export risk is negligible, but the auto component segment, which is India’s strength, faces margin and competitiveness erosion risk due to the new tariff regime.

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