India's Exporters Face 10% US Tariff, But Rivals Like Vietnam and China Face 12.5%

The 10% Section 301 Tariff on Indian Goods: What's Changed

The United States has introduced an additional 10% tariff on most Indian imports under Section 301, following a broader review of how trading partners address forced labour. India was placed in the lower 10% tariff bracket after moves to strengthen its legal framework, while several competing nations were assigned a higher 12.5% rate. The new charge is applied on top of existing US customs duties—so a product that previously attracted a 5% standard duty will now face a total landed-duty incidence of around 15%.

The immediate commercial consequence is that US importers will pay more, and may press Indian suppliers for price reductions or contract renegotiations. Industries with slim margins are likely to feel the pinch more sharply. However, the tariff is not a country-specific penalty or a finding that Indian goods are produced with forced labour; it is part of a uniform policy action.

Many of India’s principal competitors—including Bangladesh, Cambodia, Indonesia, Pakistan, Sri Lanka and Mexico—are also in the 10% category. In textiles, garments, leather and other labour-intensive sectors, Indian exporters do not become less competitive simply by virtue of the new levy. Meanwhile, rivals such as Vietnam, China, Thailand and Turkey face a 12.5% rate, potentially giving India a modest edge in price-sensitive segments.

India's Competitive Position: Who Faces Higher or Lower Tariffs?

India vs. South Asian and ASEAN Competitors: A Level Playing Field

A large group of India’s closest export rivals—Bangladesh, Sri Lanka, Pakistan, Cambodia, Indonesia, Malaysia, Mexico, Canada, the UK and Jordan—have been assigned the same 10% tariff. For fashion, basic leather goods and home textiles where competition is mainly regional, the new duty does not shift the competitive balance: buyers comparing Indian products with those from Bangladesh or Sri Lanka will find similar landed-cost dynamics.

A Slight Edge Against the 12.5% Tariff Club: Vietnam, China, Turkey and Others

The picture changes when India competes with countries placed in the 12.5% tariff group. Vietnam, Thailand, China, Singapore, Brazil, South Africa, Saudi Arabia and the UAE all face a duty 2.5 percentage points higher. While the difference looks small, it can be significant in high-volume, price-sensitive industries. US importers seeking to diversify away from suppliers that attract a higher levy may increasingly evaluate Indian manufacturers, provided they can match quality standards, delivery reliability and production scale.

Europe and East Asia: A Trickier Battlefield for Technology Exports

India faces a more challenging landscape when competing with developed economies. The European Union and Taiwan benefit from a capped-duty arrangement under which the combined customs duty generally does not exceed 10%. Japan, South Korea and Switzerland have a similar arrangement capped at 12.5%. Indian exporters of machinery, electrical equipment, engineering goods, speciality chemicals and medical devices may therefore be at a slight disadvantage against these suppliers, since their effective tariff burden is comparable or even higher than India’s, eroding price competitiveness in technology-intensive sectors.

Sectoral Winners and Losers

The gem and jewellery industry, where margins are often thin and competition intense, is likely to face considerable pressure. Textiles and garments—competing largely against South Asian peers on equal tariff footing—should see a more balanced impact, although a proposed US tariff-rate quota for countries importing American cotton inputs could tilt the field towards Bangladesh, Cambodia, Indonesia and Malaysia if implemented. Pharmaceuticals appear relatively insulated, because many drug products and ingredients fall under the exemption framework; exporters should nonetheless verify product-level classifications rather than assume blanket coverage. Certain agricultural commodities, fertilizer inputs and essential seeds are also excluded from the new tariff.

Greater Supply Chain Scrutiny

The Section 301 action is designed to tighten enforcement against forced labour, and US buyers are expected to intensify their scrutiny of supply chains. Indian exporters with transparent documentation on wages, employment conditions, raw material sourcing and social audits will be better placed to inspire confidence and retain—or win—orders.

How Indian Exporters Can Adapt: Five Concrete Steps

• Confirm tariff classification and exclusions. Obtain the official US Harmonized Tariff Schedule code for each product and check whether any exemptions apply—pharmaceuticals, certain agricultural inputs and essential seeds are partially excluded from the new duty.
• Calculate total landed duty. Add the existing ordinary customs duty, the 10% Section 301 tariff, any applicable Section 232 duties (steel/aluminium) and anti-dumping or countervailing duties, to understand the exact cost impact on every product line.
• Review contracts before cutting prices. Examine existing export agreements to determine which party bears the incremental duty. Do not automatically offer a 10% price reduction; instead, negotiate balanced solutions such as shared cost absorption, larger order commitments or longer-term supply arrangements.
• Leverage the tariff differential with buyers. In sectors where India faces a 10% tariff while rivals are at 12.5% (e.g., vs Vietnam, China, Turkey), highlight India’s lower duty treatment when pitching to US importers that are actively diversifying their sourcing.
• Strengthen labour and supply‑chain documentation. Assemble and update records on wages, working conditions, raw material origins and social audits. Transparent, verifiable ESG practices can be the tiebreaker for a buyer under enhanced due‑diligence requirements.