Warning Against Overreliance on Tariff Exemptions

While India celebrates a partial exemption from the US tariff, the announcement should not obscure the risks. More than half of Indian exports will still face the 10% levy, putting pressure on sectors like machinery and electronics that compete globally. These industries may see reduced orders and could struggle to pass on costs. The exemption, meanwhile, is temporary and subject to review. Relying on case-by-case deals makes India vulnerable to shifting U.S. trade policy. The current administration could tighten rules or demand concessions in other areas, such as market access for American dairy or data localization. Moreover, the exemption does nothing to address the underlying issue: the U.S. tariff itself, which signals a protectionist trend. Indian exporters should not assume that similar exemptions will be granted for future tariff rounds. The government must instead focus on diversifying export destinations and reducing dependence on the U.S. market. A single bilateral deal, however favorable, cannot shield the economy from longer-term trade fragmentation.