Semiconductor Dodges US Tariff Bullet, Underlines Its Foundational Role: Industry

Semiconductors have been "spared" from US tariffs, a recognition of the foundational role they play in global supply chains, industry body IESA said on Thursday, but added that headline reciprocal tariffs do present a significant challenge to India's overall exports, given that the US is the largest trading partner for New Delhi. US President Donald Trump announced sweeping reciprocal tariffs, redrawing the terms of America's engagement on global trade and economics on April 2, a date he dubbed - with much fanfare - as America's 'Liberation Day'. The US has slapped a 27 per cent tariff on imports from India.

Ashok Chandak, President of India Electronics and Semiconductor Association (IESA) said the speed and scale of tariff hikes could further slow global growth, create market uncertainty, and pressure businesses worldwide. "While India is better positioned than many other economies, these tariffs can potentially impact domestic industries, disrupt trade flows, and squeeze profit margins," Chandak said. As the geopolitical and economic landscape evolves, India must strategise swiftly, leveraging trade diplomacy, domestic policy shifts, and industrial resilience to mitigate risks and maintain its competitive edge in global trade. Semiconductors and Pharmaceuticals have been spared from tariffs, recognising their foundational role in global supply chains and public health, Chandak noted.

On the Electronics and Electricals sector, IESA said tariffs may impact India's booming exports, but that the country could remain competitive as China, Vietnam, Taiwan and Thailand face even higher tariffs. "Trump's tariffs are expected to generate billions in US customs revenue and support his vision of a 'golden age' for American jobs and manufacturing. However, (there are) warning signs of inflationary pressures, global trade disruptions, increased good prices for US consumers and recession risks," he said. Over the past many weeks, Trump's 'America first' policy and his unabashed stance of economic nationalism have unnerved financial markets, allies, and major trade partners in equal measure, raising the prospects of retaliatory tariffs and an inevitable global trade war.

Hours before the tariff announcement were made, the US Trade Representative's (USTR) 2025 Report placed India on its 'Priority Watch List' calling it out on intellectual property concerns and drawing attention on digital touchpoints like data localisation rules, IT norms, and instances of internet shutdowns, as well as "high applied tariffs" on a wide range of goods, both agricultural and non agricultural goods.

While the US has imposed a 27 per cent tariff on imports from India, steep tariff rates have been spelt out for many countries, including China (34 per cent), European Union (20 per cent), Vietnam (46 per cent) and Taiwan (32 per cent). White House has also issued a list of exemptions. "Some goods will not be subject to the Reciprocal Tariff. These include... copper, pharmaceuticals, semiconductors, and lumber articles; all articles that may become subject to future Section 232 tariffs...bullion; and...energy and other certain minerals that are not available in the United States," it said.

(PTI)