India is facing significant economic headwinds following the implementation of increased tariffs by the United States. These tariffs, the highest imposed by the U.S. on any trading partner, are a response to India's continued import of Russian oil. The tariffs, which took effect on Wednesday, August 27, 2025, risk damaging the Indian economy and disrupting global supply chains.

The Trump administration has imposed a 50% tariff on most U.S. imports from India. This includes an initial 25% tariff, followed by an additional 25% penalty due to India's continued purchases of Russian oil. The White House argues that these purchases indirectly fund Russia's war against Ukraine. While some sectors like pharmaceuticals and electronics are currently exempt, investigations are underway that could lead to further duties.

The Indian government estimates that these tariffs will impact $48.2 billion worth of exports. Indian officials have expressed concerns that the new duties could render exports to the U.S. commercially unviable, potentially leading to job losses and slower economic growth. The Federation of Indian Export Organisations (FIEO) has reported that textile and apparel manufacturers in Tirupur, Delhi, and Surat have already halted production due to decreased cost competitiveness. Barclays has warned of a "serious threat" to around 70% of India's exports to the U.S.

The Indian government has criticized the tariffs as "unfair, unjustified, and unreasonable". The Ministry of External Affairs has stated that India's imports of Russian oil are necessary to ensure affordable energy for its 1.4 billion citizens amid global supply disruptions. Indian officials have also pointed out that the U.S. and the European Union continue to trade with Russia without similar penalties.

Prime Minister Narendra Modi has emphasized the importance of protecting the interests of farmers, small businesses, and the dairy sector. He has vowed that his government will ensure they are not negatively impacted and has urged Indians to support local products. The government is also exploring ways to minimize the effects of the tariffs, including discussions with the U.S. regarding a bilateral trade agreement.

In response to the tariffs, India is pursuing several strategies. These include:

• Diversifying export markets: India is targeting 40 key markets, including the UK, Japan, and South Korea, to boost textile exports. Outreach programs are planned to promote exports in various industries, including chemicals, gems, and jewelry.
• Boosting local demand: The Indian government is promoting a "Swadeshi" mantra, encouraging citizens to buy Indian goods. Tax cuts on everyday goods are being considered to spur spending and cushion the economy.
• Seeking financial assistance: Exporters affected by the tariffs may receive financial assistance. The government is reportedly working on a US$2.8 billion package for exporters to ease liquidity concerns.
• Maintaining dialogue with the U.S.: Despite the tariffs, India is keeping the door open for negotiations aimed at a trade deal.

The tariffs have led to increased strain in U.S.-India relations. Some analysts suggest that this could incentivize India to strengthen ties with China and other BRICS partners. India's Foreign Minister S. Jaishankar has argued that India's Russian oil purchases helped stabilize global oil markets and were initially done with Washington's tacit approval.

The U.S. tariffs on Indian goods are expected to have a wide-ranging impact, affecting various sectors and potentially slowing India's economic growth. While India is taking steps to mitigate the effects, the situation remains challenging, and the future of U.S.-India trade relations is uncertain.