Tariff risks will keep orders for U.S. auto parts at bay in the long term

Auto parts makers in India are facing a slowdown in long-term orders from the US, their biggest overseas market, following threats of higher tariffs from the Trump administration, a senior industry official said.“Automakers in the US and neighboring countries are showing hesitation in talks for import supply contracts with Indian auto component makers for new projects to be implemented in the next two to three years due to uncertainty over US-imposed tariffs,” said Sriram Viji, president-designate of the Automotive Component Manufacturers Association (ACMA).

Earlier this fiscal, the US raised tariffs under Section 232 on about 55% of India’s auto parts exports to the country. In addition, reciprocal tariffs, which came into effect from September 2025, impacted exports of commercial vehicles and off-road parts, pushing import duties for certain categories up to 50%. A clarification dated November 1, 2025 returned these categories to the 25% tariff level, meaning automotive parts supplies to the US are currently subject to a uniform 25% tariff.ACMA said absorbing such high tariff levels is extremely difficult for an industry that operates on thin margins. While some exporters can manage the impact in the short term, sustainable absorption of these costs is not feasible in the longer term.

Importantly, ACMA said the full impact of US tariffs is expected to be felt more sharply in the second half of FY26.

Because many of the reciprocal tariffs were announced around August and September, export data for the first fiscal half of the year does not yet fully reflect their impact. Official trade data beyond September must be published as export and import statistics are delayed, although anecdotal feedback from the industry points to increasing pressure on exporters, said Vinnie Mehta, director general at ACMA. Despite these challenges, exports to the US remained largely stable in the first six months of FY26. The US remained India’s largest export destination for auto components, followed by Germany. Total auto parts exports rose 9.3% to $12.2 billion during the period.

Mehta said the export growth came despite multiple challenges, including higher raw material costs, logistics disruptions, tariff-related pressures and slowing demand in key international markets. “Both the European Union and the US, two of India’s top export destinations, are currently under pressure, with car markets not performing at the levels of recent years,” he said. “While exports showed resilience, imports grew faster over the same period, leading to a trade deficit compared to a surplus in FY25.”

Imports of auto parts grew by more than 12% to about $12.3 billion, resulting in a trade deficit in the first half compared to a trade surplus in the previous year.