US Reciprocal tariffs pose a risk to India’s pharma and food sectors

US reciprocal tariffs are expected to disrupt export demand across the Asia-Pacific (APAC) region, including India, creating challenges for economies highly dependent on US trade, according to a report by Moody’s Ratings. The US is a net exporter of food, feeds, and industrial supplies to the APAC region but remains a net importer of capital goods, automotive vehicles and parts, and consumer goods.

India’s food, textile, and pharmaceutical sectors could be significantly affected by the US administration’s reciprocal tariff plans, though the broader impact would be even greater on competing economies in the Asia-Pacific region, according to Moody’s Ratings. 

Moody’s said that developing countries like India, Vietnam, and Thailand, which have wide rate differentials with the US, will see sectors like electronics, automobiles, food, and textiles most affected. The rating agency’s report noted that if implemented, the policy could have broad consequences for APAC economies, particularly in sectors with significant reliance on US demand.

The tariffs, proposed under the “Fair and Reciprocal Plan” signed by President Donald Trump on 13 February, aim to align US import duties with those imposed by its trading partners.

Emerging economies in APAC, which rely on export-led growth, could struggle in an increasingly protectionist global trade environment. In response, India and the US have initiated negotiations for a multi-sector trade agreement to mitigate potential disruptions. 

Meanwhile, US President Donald Trump has already imposed higher duties on steel, aluminum, pharma, auto, and semiconductors, with additional tariffs on China. Canada and Mexico have also been warned of possible tariffs.

Moody’s noted that while the US is a net exporter of food, feeds, and industrial supplies to APAC, it remains a net importer of capital goods, automotive vehicles, and consumer goods. The full impact on credit strength will depend on APAC’s policy response. The agency expects governments to take a pragmatic approach, avoiding escalation and negotiating bilaterally, as seen in recent trade discussions.

Additionally, a restrictive trade environment could put downward pressure on the currencies of targeted APAC economies due to potential capital outflows and a stronger US dollar. This could limit the ability of regional central banks to ease domestic monetary policies, reducing their flexibility to support economic growth. 

The US remains India’s largest trading partner, with bilateral trade reaching a record US$ 129.2 billion in 2024. In FY22, India’s exports to the US were US$ 75.60 billion, increasing to US$ 78.31 billion in FY23 before slightly declining to US$ 77.52 billion in FY24. Between April and January of FY25, exports totaled US$ 68.47 billion, up from US$ 62.89 billion during the same period in 2023, according to commerce ministry data.