In response to the United States imposing tariffs of up to 50% on Indian goods, Indian authorities are actively formulating strategies to mitigate the economic consequences. These tariffs, which took effect on August 27, 2025, are a result of the US administration's concerns over India's continued procurement of Russian oil. The tariffs are among the highest imposed by Washington on any trading partner.

The Indian government views these tariffs as "unjustified and unreasonable," asserting its right to protect national interests and maintain strategic autonomy. The Ministry of External Affairs has not commented on potential counter-measures against the US.

Impact on Indian Exports and Economy

The tariffs are expected to significantly impact Indian exports to the US, potentially affecting approximately 55% of India's merchandise exports, valued at $48.2 billion. Some estimate that 66% of India's exports to the U.S., worth $60.2 billion, will face the 50% tariffs. Labor-intensive sectors, including textiles, apparel, leather, gems and jewelry, shrimp, carpets, and furniture, are particularly vulnerable. The Federation of Indian Export Organisations (FIEO) warns that these tariffs could lead to a 30-35% cost disadvantage for Indian exporters compared to competitors from countries like Vietnam, Bangladesh, and China. Production has already ceased in some manufacturing units due to shrinking cost competitiveness.

Economists and institutions anticipate a minimal to moderate impact on India's GDP growth, with estimates ranging from 0.20% to 0.90%. However, Nomura analysts caution that the 50% duties could be "akin to a trade embargo," potentially devastating the profitability of smaller firms. The State Bank of India (SBI) reports that the US GDP could be affected by 40-50 basis points due to the new tariffs, along with higher input cost inflation.

Government Strategies and Measures

The Indian government is exploring a multi-pronged strategy to counter the impact of the US tariffs:

• Policy Reforms: Accelerating policy reforms, including GST restructuring, to bolster economic confidence and growth.
• Export Diversification: Encouraging trade diversification to alternative markets, identifying nearly 50 countries for increasing Indian exports, particularly of textiles, food processed items, leather goods, and marine products. These include China, Latin America, Africa, and the Middle East.
• Export Aid: Exploring export aid measures and a $2.8 billion support package to ease liquidity pressures on exporters.
• Free Trade Agreements (FTAs): Finalizing FTAs with other countries and trade negotiations underway with the European Union. India has FTAs with Australia, the UAE, and the UK and is close to concluding an FTA with the European Union.
• "Made in India" Push: Promoting "Swadeshi" principles, urging citizens and businesses to exclusively purchase and promote 'Made in India' products to achieve national self-reliance.
• RBI Support: The Reserve Bank of India (RBI) stands ready to protect the economy from the consequences of the US tariffs, including initiatives to promote local currency trade as part of the rupee's internationalization strategy.
• Export Promotion Mission: Considering a ₹25,000-crore Export Promotion Mission, including trade finance, regulatory support, standards alignment, e-commerce hubs, warehousing, and better branding for "Brand India".

Impact on US-India Trade Relations

Despite the ongoing trade tensions, both countries have ongoing trade discussions. The two nations launched talks on a large-scale trade agreement in February 2025, seeking to increase annual trade to $500 billion by 2030. However, earlier hopes for a trade deal capping tariffs at 15% were dashed after India refused to open its agriculture market to US farm goods. A US delegation's visit to India, planned for August 25, was deferred.