Moody’s View on US Tariffs and India’s Manufacturing Outlook

Moody’s Ratings warned that the proposed 25% US tariff on Indian imports—effective August 7, plus an unannounced “penalty” for trade with Russia—will hurt India’s manufacturing ambitions, especially in higher-value sectors like electronics. The rate is significantly higher than APAC peers (15–20%), weakening India’s competitiveness amid global supply chain shifts from China. While India exports $80 billion worth of goods to the US—accounting for 18% of its total merchandise exports—the move could dampen investment and export growth. However, Moody’s expects domestic demand to remain resilient, as India’s economy is less trade-dependent than other large APAC nations. The services sector, a key strength with unmatched scale and global reach, remains insulated from these tariffs. With ongoing bilateral trade talks, India’s long-term outlook hinges on navigating trade tensions while leveraging its domestic market and service exports to offset external headwinds.