The recent imposition of steep tariffs by the United States on goods imported from India is raising significant concerns among Indian exporters, with sectors like textiles, gems, and jewellery anticipated to be the hardest hit. Effective August 27, 2025, duties on Indian products entering the US have risen to 50%. This decision by the Trump administration, is a consequence of ongoing trade deal disagreements and accusations that India's crude oil trade with Russia is indirectly financing the war against Ukraine.
The Federation of Indian Export Organisations (FIEO) has expressed serious concerns, warning that the move is already forcing factories in Tirupur, Noida, and Surat to halt production due to shrinking cost competitiveness. FIEO President S C Ralhan stated that approximately $47–48 billion worth of India's exports to the US now face a 30–35% cost disadvantage, making them uncompetitive against rivals from Vietnam, Bangladesh, and China. He described the development as a major setback that could severely disrupt supplies to India's biggest export market.
Trade experts estimate that the value of India's merchandise exports to the US could drop by as much as 40-45% in 2025-26, compared with the previous year. The Global Trade Research Initiative (GTRI) projects that product exports to the US could fall to $49.6 billion this year from nearly $87 billion in 2024-25, as a significant portion of exports will be subject to the 50% tariffs.
Several sectors are bracing for heavy losses. These include labor-intensive industries like leather, marine products, and engineering goods, particularly in West Bengal. Exporters have reported that shipments and production are currently on hold due to the geopolitical tensions exacerbated by the US tariffs. The gems and jewellery sector, with approximately 40% market share in the US, faces high tariffs that could threaten jobs in Surat and Mumbai. The textile and apparel industry is also expected to suffer, with manufacturers in key hubs like Tirupur, Noida, and Surat already halting production.
While certain sectors like pharmaceuticals, electronics, and petroleum products, constituting about 30% of India's exports to the US, remain duty-free, the majority of exports will face the brunt of the increased tariffs. This includes apparel, textiles, gems and jewellery, shrimp, carpets, and furniture.
The tariff hike's impact could be broad-based, as the US accounts for a significant percentage of merchandise exports from India and a notable portion of its GDP. The Indian rupee has already fallen, and equity indexes have declined in reaction to the news. Some businesses are exploring strategies to cope with the tariffs, including offering discounts to retain US buyers and scouting for new markets in Russia, Latin America, and Africa. However, many acknowledge that these options may not fully compensate for the potential losses.
Economists have expressed concerns that the tariffs could be inflationary and that India's trade surplus with the US could potentially turn into a deficit. There are also worries that India's GDP growth could fall below earlier projections if the tariffs remain in place for an extended period. Concerns have been raised that competitors with lower tariffs, such as Vietnam, Bangladesh, Cambodia, China and Pakistan, could benefit from India's losses in the US market.
