Trade Wars & Tariffs – A Turning Point for Indian Specialty Chemicals?

In early April 2025, the U.S. government implemented a key shift in global trade policy: a sweeping reciprocal tariff regime that would send ripples through the markets and supply chains worldwide.

The Trump administration has imposed a universal 10% tariff on all imports to the US. While almost every major country, including India, has been subject to this increased tariff, the impact on China has been massive.

At the beginning of April, Trump imposed a 54% tariff on imports of products from China, which later escalated to the current 145% rate. This means a product worth $100 from China would now cost American companies about $245, almost 2.5 times the original price. In its tit-for-tat response, China imposed tariffs of 34% on US goods, before increasing them to 84% and then finally 125%.

While key sectors like pharmaceuticals and semiconductors are excluded from these new tariffs for now, government sources and reports indicate they may soon face separate sector-specific urgency across global supply chains. 

What does this Mean for Global Supply Chains?

Companies bringing foreign goods into the US need to pay tariffs, which are typically calculated as a percentage of the goods' total value.

As per the current scenario, we must understand that the reciprocal tariffs imposed by President Donald Trump are not just political headlines about a particular administration; they have real and immediate impacts on global trade and markets.

Businesses in the US that depended heavily on, say, China for decades to source low-cost chemicals and other raw materials are now forced to think otherwise. 

And it’s not just about the financial burden - supply timelines are being disrupted, contracts are being reworked, and long-standing relationships are under great strain. What used to be a smooth, reliable supply chain process has suddenly become chaotic.

What does this mean for India? A unique opportunity to step in and fill the supply chain gap?

India’s Moment as a Specialty Chemicals Powerhouse

India's specialty chemicals sector is fast emerging as a global force, accounting for nearly 22% of the country’s overall chemicals and petrochemicals market. As of 2024, the sector was valued at USD 64.5 billion, and it's expected to grow to USD 92.6 billion by 2033, at a CAGR of 3.8%. With global supply chains shifting away from China, India is well-positioned to fill the gap, supplying critical materials to industries like automotive, textiles, and agriculture.

In the recently concluded Startup MahaKumbh in New Delhi, Scimplify’s co-founder, Sachin Santhosh, resonated a similar thought. He says:

“While reciprocal tariffs create short-term bottlenecks, they also unlock opportunities for supply chain diversification. India’s specialty chemical industry can capture this window with agility, transparency, and R&D-driven innovation.”

Why India Stands Out?

The Indian government is also actively supporting the manufacturing sector through its policies, encouraging industrial growth and sustainable manufacturing practices.

India has several key advantages in manufacturing specialty chemicals, which make it an attractive option for global buyers. 

• Cost-effective Production: India offers significant cost benefits. Average monthly manufacturing wages in India are $240–$280, far lower than China’s $650–$700. Electricity costs are also cheaper at $0.08/kWh compared to $0.12/kWh in China, significantly cutting down overall production costs, especially for labour-intensive specialty chemical production.
• Skilled Labour: India produces 1.5 million engineers and over 300,000 chemistry graduates annually, feeding directly into R&D and production roles. In 2023, the chemical sector invested ₹10,000 crore ($1.5 billion) in R&D focused on innovative formulations and low-emission processes.
• Sustainability Focus: India has been increasing its focus on sustainable manufacturing practices to cater to the growing demand for eco-friendly products. The Indian government has significantly promoted green chemistry and low-emission manufacturing processes.

What is the Sector-wise Impact?

Specialty Chemicals

India imports many raw materials from China to make specialty chemicals. These include essential ingredients like titanium dioxide (used in paints and coatings), phthalic anhydride (used in plasticizers and resins), epoxy resins (used in adhesives and composites), alkylphenols (used in detergents), and several components for dyes and cosmetics. 

Due to the recent tariff hikes, where the U.S. and other countries are imposing high duties on Chinese goods, China is passing on some of these increased costs. As a result, the price of these imported raw materials has increased by 10–15% in India. This directly impacts Indian manufacturers who rely on these inputs, making their production more expensive. 

This creates pressure for export-driven businesses: they must either increase prices (and risk losing competitiveness) or absorb the costs (which reduces profit margins). A primary challenge will be balancing the rising cost of raw materials while maintaining the high standards of product quality that make India a competitive player in the global specialty chemicals market.

If managed well, India has the potential to boost export volumes, especially if local manufacturing capabilities are scaled up to reduce reliance on expensive imports.

Agrochemicals

India’s agrochemical industry will likely benefit from the recent U.S. tariffs on Chinese imports, as they make Chinese products more expensive. Although Indian agrochemicals now face a 26% tariff in the U.S., it's still lower than the tariffs on China (34%), Vietnam (46%), and Bangladesh (37%), giving India a relative price advantage.

Since the U.S. heavily depends on imports of raw materials like glyphosate, pesticides, fungicides, and fertilizers from China, these tariffs are expected to raise input costs. As a result, buyers may turn to Indian suppliers, leading to a projected 14–16% rise in exports of herbicides and growth regulators in FY2025.

However, the 26% tariff on Indian imports, imposed from April 9, 2025, is currently on hold for 90 days; if reinstated, it could make Indian exports less competitive by raising costs for U.S. buyers.  

Pharmaceuticals & APIs

India’s pharmaceutical industry and API (Active Pharmaceutical Ingredients) face a complex challenge due to these tariffs. In FY2024, India imported APIs and bulk drugs worth ₹37,700 crore, with 70% of them being sourced from China. 

The tariffs are likely to increase the cost of Chinese-origin APIs, putting pressure on India’s pharmaceutical manufacturing costs. This could lead to higher prices for domestic production and exports. 

On the positive side, the Indian government's efforts to increase domestic API production through initiatives like the Production Linked Incentive (PLI) scheme may help reduce reliance on Chinese imports and drive long-term growth in the sector. However, the immediate impact is still likely to be higher input costs and potential production delays.

Adapting to Trade Disruptions – A Few Key Steps

Build a More Flexible Supply Chain

To avoid delays and sudden cost increases, companies should work with multiple suppliers across different regions. This reduces the risk of relying too much on one country, especially during trade disruptions. A flexible supply chain can help ensure steady production even when tariffs change suddenly. 

Invest in Technology & Automation

Upgrading machinery and using automation can help reduce production costs and improve speed. It also helps chemical businesses respond faster to sudden market changes and new regulations, such as the recent reciprocal tariffs imposed by the US. Smart investments now can lead to long-term savings and more substantial competitiveness.

Focus on Sustainability & Green Chemistry

Customers and global partners are asking for cleaner, more eco-friendly products or similar alternatives. Chemical companies that use low-emission processes and adopt green chemistry principles will be better positioned to win trust and meet ESG expectations. A focus on sustainability opens doors to new markets. Diversification of markets means a lesser negative impact on businesses when hit with unexpected trade disruptions.

Establish Collaborations with Industry Experts

Forming partnerships with chemical industry experts can provide businesses with access to tailored solutions and insights to navigate the complexities of trade disruptions. Moreover, such collaborations can help businesses predict or forecast disruptions that may severely impact supply chains.

Scimplify – Helping Companies Navigate Complex Tariff Rules

In today’s rapidly changing global trade environment, chemical businesses often face uncertainty and disruptions, primarily due to shifting tariff regulations and evolving international trade policies. At Scimplify, we understand these challenges deeply and have tailored our approach to help businesses thrive despite these disruptions.

Our extensive global network, with multiple strategic centres across India and internationally, allows us to adapt and respond to market changes swiftly. By collaborating closely with carefully vetted suppliers worldwide, we ensure a consistent supply of high-quality chemicals, regardless of external trade uncertainties.

When tariff rules change unexpectedly, our diverse and flexible supply chain is already equipped to adapt quickly. We continuously monitor global regulatory landscapes and proactively manage compliance requirements, significantly reducing risks and minimizing disruptions for our partners. This way, companies working with us can confidently maintain their sourcing strategies without sacrificing quality or timeliness.

Our robust and responsive systems ensure that your business experiences seamless chemical procurement, allowing you to focus on innovation and growth, no matter how global trade policies shift. We don't just help you navigate trade disruptions; we transform them into opportunities, keeping your business resilient, agile, and ahead of the competition.

Get In Touch!

Are you looking for a partner who can help you navigate the current trade challenges? Contact us at info@scimplify.com to explore how we can collaborate to ensure your business stays ahead even in uncertain times.