Indian businesses speed up production shift to UAE as 50% US tariffs come into force

Mangalore Today News Network

Dubai, Aug 27, 2025: Businesses in India did not waste any time in looking for options in the UAE from the time President Trump set 25% as tariffs on Indian exports to the US – and then doubled it for the country buying oil from Russia. Those tariffs have now taken effect as of today (August 27).

Consultancies that advise on business set up and support services say that the number of enquiries from Indian businesses have definitely been higher after the Trump announcements.

“After the first 25% was revealed, many in India were still hopeful that this was a Trump negotiating tactic,” said the CEO of a food processing unit in the UAE. “Then came the second 25% and there seemed no move to reach a deal between the US and India. That has got several Indian businesses with US exports talking to us about some sort of joint ventures or investments in the UAE.”

The same talks are being heard in the UAE’s jewellery trade, with more Indian companies looking to set up jewellery design and production centres here rather than have them ship out from India. India’s jewellery export businesses will take some of the biggest hits if the 50% tariffs remain. With the extra 25%, the landed cost in the US will ‘price them out of the US market’.

"India’s labor-intensive exports, the stitching together of supply chains, now face a brick wall in their largest market (the US). That’s not just a tariff, it’s an eviction notice from a house they’ve lived in for decades" - Stephen Innes Managing Director of SPI Asset Management 

The Trump tariffs on India exclude pharma and tech-related products. That means no tariffs on Apple for shipping out iPhones from its India facility back to the US.

The Indian rupee slid on Monday (August 26) and the Sensex was off by just over 1% in reaction to the US tariffs. The Indian markets are closed today on account of Ganesh Chaturthi.

So, if these Indian jewelers can shift production meant for the US to the UAE, it would mean tariffs of 10% on exports and not 50%. Of course, that applies only ‘if the production and value addition happens in the UAE’, said Krishnan Ramachandran, CEO of Barjeel Geojit Financial Services.

"Indian firms have always shown interest in the UAE - making up around 5% of our total enquiries on business setup in the region since January 2025" - Oksana Sukhar, Senior Business Development Manager at the consultancy Sovereign Group

According to Oksana Sukhar, Senior Business Development Manager at the consultancy Sovereign Group, “Indian firms have always shown interest in the UAE - making up around 5% of our total enquiries on business setup in the region since January 2025.

“It would be reasonable to assume that Indian firms exporting to the US may now be reconsidering where they manufacture and ship products from in order to secure the most favourable tariff rates. Especially if their core (export) market is the US.

“The UAE serves as a strong example of such an alternative hub.”

Early mover advantage

Now, several Indian businesses already have a presence in the UAE, ’particularly in sectors such as textiles and garments, metals and engineering goods, chemicals, pharmaceuticals, and IT-enabled services’, said Venkatesh Santhanam, Managing Partner at MCA Gulf and former convener at IBPC Dubai and former chairman of ICAI Dubai Chapter.

"These companies are well placed to benefit."

"Several Indian businesses already have a presence in the UAE, particularly in sectors such as textiles and garments, metals and engineering goods, chemicals, pharmaceuticals, and IT-enabled services" - Venkatesh Santhanam of MCA Gulf

What Indian businesses planning to set up in UAE need to do

    To meet ’rules of origin criteria and avoid falling foul of US tariff barriers, Indian companies typically need to demonstrate 35–40% local value addition.

    This means that a meaningful portion of manufacturing, assembly, or finishing must take place in the UAE. "Businesses are increasingly recalibrating their supply chains to achieve this, whether by relocating final-stage production, setting up packaging and distribution centres, or forming local joint ventures," said Venkatesh Santhanam of MCA Gulf.