Introduction
Tariff policy has moved to the centre of boardroom strategy, changing how businesses structure cross-border supply chains, investments, and expansion plans. As the global political climate shifts and economic self-reliance grows more urgent, India, like other leading economies, is deploying tariffs as sophisticated tools for growth, protection, and leverage.1 For company leaders, staying ahead of these policy shifts is now a requirement for business resilience.
Tariffs as an Engine of Policy in Modern Business
Tariffs are no longer just a source of government income. Over the past decade, they have become essential for corporate risk modelling and market strategy.2 In India and globally, tariffs now shape supply chain decisions, prompt recalibration of sourcing, and even influence negotiations with governments and suppliers. Increasingly, they encourage domestic R&D, support preferred sectors, and signal economic priorities while responding in real time to world events.3
Diverging Frontiers: US, EU, and Gulf Nation Strategies in Tariffs and Trade Regulation
Bottom of FormUnited States: Tariff Measures and Economic Influence
The US uses statutory powers like the Trade Act of 1974 and the Trade Expansion Act of 1962 to introduce or adjust tariffs quickly in response to shifting trade challenges. In 2018, sweeping tariffs were imposed under Section 232 of the Trade Expansion Act of 1962, targeting the steel and aluminium sector on "national security" grounds. This forced the global auto and construction industries to scramble for new suppliers while allies and rivals retaliated.4 In 2018, further addressing intellectual property violations, the U.S. imposed tariffs on Chinese goods under Section 301 of the U.S. Trade Act of 1974, prompting global manufacturers to swiftly diversify production and restructure their supply chains.5 The 2025 threat of a 26% tariff on Indian textiles, chemicals, and machinery, though ultimately paused, demonstrates how fast these policy shocks can impact Indian exporters.6 US exclusions for pharmaceuticals, semiconductors, and critical minerals reflect a strategic approach to protect and promote vital industries, setting a demanding example for other countries.
European Union: Market Access and Regulatory Conditionality
While the EU's Common Customs Tariff provides a baseline, mounting regulatory requirements mean market entry is now governed by environmental, labour, and governance standards.7 The Carbon Border Adjustment Mechanism ("CBAM"), which is coming into effect in 2026, will require exporters, including those in India's steel, aluminium, and cement industries, to account for European carbon pricing.8 The European Union (EU) continues to impose anti-dumping duties, which are tariffs on imports priced below fair market value. For example, Asian flat-rolled steel has been targeted because it's often sold at artificially low prices that harm European producers. These duties raise the cost of such imports, forcing suppliers and buyers to adapt by switching suppliers, changing product mix, or renegotiating existing contracts to manage increased costs and maintain profitability.9
Beyond tariffs, the EU also uses non-tariff or "soft" barriers, which include complex regulatory standards that exporters must meet to access the European market. One such measure is REACH (Registration, Evaluation, Authorisation, and Restriction of Chemicals), a regulation that requires companies to register and prove the safety of chemical substances used in their products before selling them in the EU. Similarly, the EU imposes labour sourcing requirements, meaning companies must show that their products are made without exploitative or unethical labour practices.
Together, these soft barriers make regulatory compliance just as crucial as managing traditional costs like tariffs, because failure to meet these standards can result in restricted market access, legal penalties, or reputational damage.
Gulf Cooperation Council (GCC): Stability with Adaptive Policies
The GCC applies a 5% external tariff as standard, but national governments adjust levels to align with local economic priorities.10 Saudi Arabia, for example, has raised tariffs on steel, poultry, and textiles, sometimes up to 25%, as part of its "Vision 2030" economic transformation, prompting Indian and global exporters to revise pricing and even joint venture arrangements.11 The UAE's combination of free zones (with customs exemptions), efficient digital systems, and re-export privileges attracts multinationals seeking supply chain hubs.12
Cross-Sector Impact of Tariff Volatility
Indian textiles and garment exporters have faced unpredictable US and EU orders, directly tied to shifts in tariff schedules and compliance requirements.13 Gems and jewellery exporters have had to manage tougher traceability and customs hurdles, particularly for lab-grown diamonds, which have increased compliance costs and impacted timelines.14 In processed foods, sudden changes to health and safety standards in importing countries impose new paperwork, sometimes closing profitable markets overnight.15 In response, India is digitizing customs, scaling incentives, and negotiating expanded market access to preserve export competitiveness.16
Advancing India's Tariff Mosaic and Business Resilience
India sustains its competitiveness by implementing rapid anti-dumping measures and provisional duties to shield key sectors when needed. Integrating AI-based analytics for risk-based customs compliance and the ongoing rollout of enhanced electronic trade infrastructure, such as ICEGATE for electronic manifest filing, further streamlines the import-export process. Efforts to support MSME participation are designed to expand export capacity and foster inclusive growth. Protections in Free Trade Agreements (FTAs) enable in-cycle calibration of tariff and safeguard mechanisms, allowing India to promptly address market distortions or import surges and better protect domestic industries.
India's Trade Strategy: Strengthening Domestic Industry and Enhancing Port-Led Growth
India's trade policy has actively increased tariffs on finished goods like electronics, toys, and certain steel products to give domestic producers a cost advantage and reduce import dependency. Conversely, the government has lowered or eliminated customs duties on essential raw materials and input components, making manufacturing cheaper within India and increasing export competitiveness. India has also launched the Sagar Mala initiative, an ambitious program to modernize ports and foster port-led manufacturing and logistics hubs. By aligning customs incentives and tariff reductions with specific port economic zones, such as special economic zones (SEZs) and notified "coastal economic units," the government incentivizes investments in sectors like shipbuilding, food processing, and advanced manufacturing adjacent to ports. Other key moves include the rollout of 24/7 customs clearance, streamlined electronic documentation ("Single Window Interface"), and rationalized port tariffs to reduce export-import costs and turnaround times. These steps encourage using Indian ports over regional trans-shipment hubs, anchor domestic value addition, and secure national supply chains.
The Production Linked Incentive (PLI) scheme provides fiscal support linked to incremental output, deepening the impact of tariff policy. India upgrades customs management through faceless assessments and digital clearances, yet ongoing challenges like inverted duty structures or classification disputes continue. India has recently rolled out the Electronics Component Manufacturing Scheme (ECMS), a Rs. 22,919 crore, six-year horizontal incentive launched in April 2025 to attract Rs . 59,350 crore in investments, generate Rs. 4.56 lakh crore in production, and create approximately 91,600 direct jobs. The scheme offers turnover, capex, and employment-linked incentives by targeting sub-assemblies, high-tech components, and capital equipment. Meanwhile, India's customs are being upgraded with AI-driven faceless assessments and digital clearances to reduce processing times.
Recommendations
- Conduct Tariff Impact Analysis
Companies should routinely review tariff structures affecting their inputs and finished goods, and restructure supply chains or sourcing strategies to minimize costs caused by inverted duties. - Adopt Digital Trade Tools
Implement AI-enabled customs compliance, documentation automation, and risk detection systems to streamline clearances and reduce human error at customs checkpoints. - Strengthen MSME Partnerships
Larger firms should mentor MSMEs on export compliance, help them adopt digital infrastructure, and integrate them into global supply chains through vendor development programs. - Monitor FTAs Proactively
Set up internal review systems to assess the business impact of Free Trade Agreements (FTAs) and use this data to renegotiate supply contracts or inform policy feedback through trade associations. - Align with Global Standards
Upgrade internal processes to match international quality, labour, and environmental standards such as ISO, REACH, or ESG frameworks to maintain market access and enhance credibility. - Build Internal Trade Awareness
Establish cross-functional communication channels to keep procurement, legal, compliance, and logistics teams informed of regulatory changes and new trade policies for a timely response.
Conclusion
Predictable global tariffs are a thing of the past. India's approach, combining substantial defensive tariffs, digital innovation, sectoral incentives, and active international engagement, offers resilience and opportunities for firms that treat trade compliance and policy engagement as core business priorities. Those embracing this new dynamic will turn India's evolving landscape into a sustained competitive advantage.
Footnotes
1. Ministry of Commerce & Industry, 2023
3. World Trade Organization, 2023
4. Section 232 of the Trade Expansion Act, 1962
7. World Trade Organization, 2023
9. World Trade Organization, 2023
10. EY India, 2023
11. World Trade Organization, 2023
12. EY India, 2023
13. EY India, 2023
14. World Trade Organization, 2023
15. Ministry of Commerce & Industry, 2023
16. EY India, 2023
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