U.S. Tariff Hike to Hit Indian MSMEs in Textiles, Diamonds, and Chemicals Hard: Crisil

A CRISIL Intelligence report warns that the U.S. government's decision to raise tariffs on Indian goods—including an additional 25% duty effective August 27, pushing the total tariff to 50%—will critically impact India's micro, small, and medium enterprises (MSMEs), particularly in the textiles, gems and jewellery, and chemical industries.

MSMEs in Key Export Sectors Bear the Brunt

MSMEs account for approximately 45% of India’s total exports. Within that, they hold over 70% market share in textiles, gems, and jewellery, and around 40% in chemicals. With textiles, gems, and jewellery representing 25% of India’s exports to the U.S., the tariff escalation is poised to severely squeeze margins and reduce competitiveness in these sectors.

Surat, India's diamond polishing hub, is especially vulnerable—diamonds alone make up more than half of the country’s gems and jewellery exports, with the U.S. being a major market. In textiles, ready-made garment makers in regions like Tirupur—responsible for over 30% of India’s RMG exports—stand to lose ground against competitors such as Bangladesh and Vietnam, which face lower tariffs of around 31%.

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In chemicals, competition from Japan and South Korea—whose exports face lower U.S. tariffs—could further erode India's market position. CRISIL notes that while MSME-run steel units, predominantly producing long and re-rolled products, may see limited impact, the broader effect across key sectors points to a potential export downturn.

Broader Economic Implications

Overall, the tariff spike threatens export competitiveness across sectors that are vital to employment and trade. Analysts caution that MSMEs will struggle to absorb the added costs without passing them to end buyers or losing U.S. market share—and may require strategic shifts such as market diversification.

Conclusion

As U.S. tariffs rise to 50%, India's MSME-exporting industries—especially those that deal with textiles, diamonds, and chemicals—face significant challenges. Due to MSMEs' strong dominance in these sectors, immediate issues include declining margins, diminished competitiveness, and possible job losses. The results demand that trade policies and tactics be urgently reformulated in order to protect this vital economic sector.