US tariffs on China, Mexico a big break for local electronics companies

New Delhi: The US tariffs on China and, possibly, Mexico open a large opportunity for electronics manufacturers in India, particularly in the field of mobile phones, IT products and TVs, and may help in boosting exports, several industry executives and experts said.

The Donald Trump administration has imposed 10% tariffs over and above the existing tariffs on Chinese imports. The tariffs on Canada and Mexico are to the tune of 25%. In a late night development, tariffs on Mexico were, however, paused for 1 month.

The development creates an opportunity for India's electronics sector, particularly for smartphones, which have become India's top export to the US ahead of diamonds, said industry executives.

Along with phones, IT products would benefit most, and India is already expanding capacities for IT hardware manufacturing through a production-linked incentive (PLI) scheme.

China and Mexico together offer $60 billion worth of IT products to the US annually.

"India, which has been left untouched so far by the US administration, should utilise this opportunity to nurture it into a long-term opportunity by striking a bilateral deal with the US," Sunil Vachani, chairman, Dixon Technologies, told ET.

For companies looking to diversify, India offers them large scale along with labour intensive and design capabilities with good local value addition.

So, while there is hope that this could prove to be an advantage for India's exports, it is yet to be ascertained as to how long and what will be the full impact of these new tariff levies. The manufacturers are in a wait and watch mode about the US administration's move towards India in the coming months.

"If India manages to avert tariffs, it's a golden opportunity for the Indian manufacturers," said an executive. Another executive at another Indian contract manufacturer said President Trump has also spoken about "universal tariffs", so it remains to be seen if specific products such as smartphones attract universal tariffs across China, India and Vietnam. "This will nullify India's advantage," the executive said.

"While India is out of the first wave of tariff hikes in the first 100 days of the Trump administration, the threat of tariffs on India around April, which is when the Trump administration would have completed trade deficit-based analysis of each country, still looms large," said an expert on condition of anonymity.

He added if the Trump administration imposes tariffs on Vietnam, whose surplus was up 20% in 2024 with the US as compared to 2023 and has the third highest trade surplus with the US, it could affect several electronics companies with large manufacturing operations in that country, who could look at India more aggressively for investments.

Samsung, for example, is currently the largest exporter of electronics products including smartphones from Vietnam.

The Indian government on its part has been taking steps to work along with the US administration. Indicating its willingness to take on board US concerns, India has reduced tariffs on US products in the budget that will benefit companies like Harley Davidson. The Indian government has also agreed to take back illegal immigrants from the US and the upcoming visit of Prime Minister Narendra Modi to the US is expected to chart out a partnership with the US government.

India will have to wait and watch on multiple fronts for the time being. Also, China's reaction so far has been somewhat muted on the economic front, unlike tariff retaliations announced by Mexico and Canada.

While Canada has responded by imposing 25% tariffs on $155 billion of US imports, Mexican President Claudia Sheinbaum has ordered imposition of a combination of tariff and non-tariff measures-possible retaliatory tariffs on US imports ranging from five to 20%.

The Chinese government has so far only denounced tariffs and may challenge them in WTO and take unspecified "counter measures" in response to the levy, said China's finance and commerce ministry.