New Delhi, 22/08/2025: India’s small and medium businesses are facing a big challenge. Starting August 27, 2025, the United States will increase tariffs on many Indian goods from 25 percent to 50 percent. This move will make Indian products much more expensive in the US market and hurt the competitiveness of Indian exporters compared to countries like Bangladesh and Vietnam. A report by CRISIL Intelligence shows that this will impact micro, small and medium enterprises (MSMEs) the most, as they dominate key export sectors.
MSMEs are a crucial part of India’s export story. They contribute nearly 45 percent of the country’s total exports, and a large portion of this comes from industries such as textiles, gems and jewellery, chemicals, and seafood. These sectors depend heavily on the US market, and in many cases, over 70 percent of businesses in these areas are run by MSMEs. Chemicals are another vulnerable area, where small businesses account for about 40 percent of exports. Together, textiles, gems, jewellery, and seafood make up roughly a quarter of India’s exports to the US, making them especially exposed to these tariff hikes.
Some of India’s biggest export hubs are likely to feel the sharpest pain. Tirupur, a leading hub for ready-made garments, accounts for over 30 percent of the country’s garment exports. For these exporters, the US tariff jump means that total duties on Indian garments could go as high as 61 percent. In contrast, competitors like Vietnam and Bangladesh will face duties of around 31 percent, giving them a big price advantage in the American market. Similarly, Surat, which handles more than 80 percent of India’s diamond cutting and polishing work, is also at risk. Diamonds make up more than half of India’s gems and jewellery exports, and the US is one of the biggest buyers. Higher tariffs will make Indian diamonds and jewellery far less competitive, especially when other countries face lower duties.
Seafood exporters are also staring at a tough future. While US duties on Indian seafood will rise to 50 percent, Ecuador, a major rival, will only face tariffs of about 15 percent. This massive gap means Indian fish exports could lose ground quickly. The chemical industry, which is already facing intense competition from countries like Japan and South Korea, will also suffer. Auto component manufacturers are another group that could feel the pressure. Although the US accounts for just 3.5 percent of India’s auto parts exports, many MSMEs supply critical parts like gearboxes and transmissions to bigger exporters who sell to American buyers. These companies could also see orders fall.
In total, goods worth about 19 billion US dollars from India could be affected by these new tariffs. Some sectors like pharmaceuticals will escape this hit for now. Drugs and medicines make up about 12 percent of India’s exports to the US, and these currently face no extra duties. Steel exporters will also see very little impact because most MSMEs make steel products for the domestic market, while the US mostly imports flat steel from India, which is only about one percent of India’s total steel exports.
Industry experts warn that these changes will squeeze MSMEs badly. Many of these businesses work on thin profit margins, and absorbing the higher costs from tariffs will be very difficult. Passing these costs on to buyers is also not easy because global markets are highly competitive. As a result, Indian exporters risk losing business to rivals in countries like Vietnam, Bangladesh, and even Ecuador, which enjoy much lower or no additional tariffs.
The CRISIL report suggests that India needs to act quickly to limit the damage. One option is to explore new markets beyond the US, such as in Europe, Southeast Asia, and Africa. Another is to make use of trade agreements like the recently signed India–UK Free Trade Agreement, which could help exporters of textiles, gems, seafood, leather goods, and pharmaceuticals. At the same time, the Indian government is preparing measures to support affected businesses. These include credit guarantee schemes where banks will receive a 10 to 15 percent guarantee on loans to small exporters, as well as term loans with government backing of up to 75 percent. The government is also planning a new export promotion mission to help MSMEs find alternative markets and buyers.
The coming months will be challenging for small businesses that rely on the US market. Sectors like textiles, gems, chemicals, seafood, and auto parts are all vulnerable to the steep rise in duties. With US tariffs doubling, Indian exporters face tough competition and shrinking profits. However, by focusing on new markets, taking advantage of trade deals, and using government support schemes, MSMEs can reduce the impact of this setback and work toward building a more resilient export base in the future.
