India prepares for impact of tariffs

Ongoing trade tariff negotiations between India and the United States are influencing the air cargo sector, which serves as a vital link in bilateral trade. With India’s non-agricultural exports to America valued at US$81.16 billion in 2022, airfreight plays a crucial role in ensuring the efficient movement of goods.

However, evolving tariff structures and regulatory shifts present new challenges that could impact trade volumes, logistics planning, and operational efficiency. Adjustments and air cargo flow Recent tariff modifications on key export categories have introduced volatility in freight movement, requiring air cargo operators to adapt their logistics strategies. The Most-Favoured Nation (MFN) applied tariffs for non-agricultural products stood at an average of 13.5 percent in 2023, reflecting the complexity of India’s trade commitments under the World Trade Organization (WTO).

Changes in tariff structures, particularly in high-value sectors such as electronics, machinery, and textiles, are driving fluctuations in cargo volumes as exporters seek cost-effective shipping solutions. For air cargo operators, these fluctuations require adjustments in capacity planning, route optimisation, and supply chain management. Tariff increases on high-value goods such as mechanical and electronic equipment could necessitate a shift in freight allocation, potentially leading to increased demand for alternative routes or intermodal solutions to mitigate costs.

Regulatory challenges

One of the most pressing concerns for India’s air cargo industry in the context of the US trade dispute is customs clearance efficiency. Initiatives such as Faceless Assessment and single-window clearance have improved procedural transparency, yet increased scrutiny of tariff classifications and duty structures has resulted in longer processing times for certain shipments. This is particularly significant for time-sensitive cargo such as pharmaceuticals and perishable goods, which depend on expedited customs procedures. Aviation logistics professionals emphasise that continued modernisation of customs processes will be crucial in maintaining India’s trade competitiveness.

Automating tariff assessments and implementing risk-based inspections can help streamline clearance times and improve overall efficiency at key air cargo hubs. Investing in digital infrastructure at major airports such as Delhi, Mumbai, and Bengaluru will be key to addressing these operational challenges and ensuring the smooth flow of goods. Facilitating trade Despite ongoing trade tensions, air cargo remains a strategic enabler of India-US trade, supporting a significant proportion of India’s exports to the US, particularly in high-value and timesensitive categories.

With US-bound shipments accounting for nearly 38 percent of India’s total non-agricultural airfreight exports, there is a strong push for government-led policy reforms to ensure continuity in trade flows amidst evolving tariff structures. Strengthening cargo infrastructure by increasing dedicated freighter capacity and integrating multimodal connectivity between air and sea freight networks is seen as a priority. Additionally, developing tariff mitigation strategies, such as preferential trade agreements (PTAs) or revised duty structures, is being explored to minimise cost burdens on exporters.

Advancing technology-driven logistics solutions, including AI-powered customs classification systems and blockchainenabled trade documentation, is also under consideration to enhance transparency and reduce administrative bottlenecks. These measures are expected to improve supply chain efficiency and position India’s air cargo sector as a more resilient player in global trade.

Future directions

As Indi…