Zero Tariff on U.S. Imports May Spark Growth in India's Electronics Sector

Analysts view the U.S. decision to impose reciprocal tariffs as a strategic opportunity for India to attract electronics manufacturers currently based in China. To fully capitalize on this shift, experts believe New Delhi must take decisive action by eliminating import duties on U.S. electronics, aligning with Washington's near-zero tariff policy. Such a move could make India a more competitive destination for global electronics firms seeking alternatives to China, boosting its manufacturing sector and enhancing its position in the global supply chain.

India currently imposes a 16.5% Basic Customs Duty (BCD) on electronics imports from the U.S., while the U.S. charges just 0.4% on Indian exports. Lowering tariffs on U.S. electronics could make India a more attractive manufacturing hub for global tech giants like Apple and Motorola. Given the ongoing tariff conflict between the U.S. and China, India has a unique opportunity to capture manufacturers looking to relocate from China. Additionally, as India imports relatively few electronics from the U.S., reducing tariffs would likely have minimal impact on local businesses or flood the market with U.S. products, making it a win-win for both sides.

The India Cellular and Electronics Association (ICEA), which represents major companies such as Foxconn, Apple, and Dixon, is backing a reciprocal zero-duty trade agreement with the U.S. The association points out that India already offers similar tariff-free benefits under its Free Trade Agreements (FTAs) with countries like Japan, South Korea, and ASEAN members such as Vietnam, Thailand, and Indonesia. This precedent supports the case for extending similar treatment to U.S. imports, potentially boosting India’s electronics manufacturing sector.

“We are optimistic that a well-structured Bilateral Trade Agreement (BTA) between the two will materialise. If done right, this could propel India’s electronics exports to the US from $10 billion to $80 billion by 2030, an 800% surge”, says Pankaj Mohindroo, chairman, ICEA.

The U.S. is a key export market for India’s electronics industry, particularly for iPhones, which make up 50% of the country’s electronics exports. In 2024, India’s total mobile phone exports reached $20.4 billion, while electronics imports from the U.S. remained relatively modest at $1 billion. This limited import volume poses little risk to local businesses, further strengthening the case for reducing tariffs on U.S. electronics to boost manufacturing and attract foreign investment.

According to market research firm Counterpoint Research, while electronics is a crucial sector, negotiations on other industries, such as motorcycles, pharmaceuticals and agriculture, will take precedence. “Tariff talks on electronics may come later as other sectors are currently on the table”, says Tarun Pathak, research director, Counterpoint.

Prachir Singh, senior analyst at Counterpoint, said India has built a strong manufacturing ecosystem, and aligning import tariffs with US rates would bring more benefits than risks. “It will be a good strategy for the country to reduce its import tariffs and make it inline with the US on electronics as it will do more good than harming us”, says Prachir Singh .

If India chooses to maintain its current tariff rates, analysts warn that companies like Apple may consider expanding their manufacturing operations in other countries with lower import duties. This could result in India losing out on potential investments and manufacturing opportunities, as firms seek more cost-effective environments to produce and export their products.

“Our electronics exports are dependent on the US. Whatever we have been able to achieve is because of companies such as Apple, who are proactively exporting from India”, says Faisal Kawoosa, chief analyst at Techarc. He says that going forward it might be possible that companies such as Qualcomm start assembling chips in India, instead of China.