As of today, August 27, 2025, the United States, under the Trump administration, has implemented a 50% tariff on a significant portion of goods imported from India. This decision, which includes a 25% additional tariff, is poised to impact nearly half of India's $87.3 billion in exports to the US. The tariffs are a result of ongoing trade deal disagreements and accusations that India's crude oil trade with Russia is indirectly funding the war against Ukraine.
The US Department of Homeland Security (DHS) has officially announced the 25% additional tariff, effective for Indian goods "entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 am eastern daylight time on August 27, 2025". The DHS notification states the tariffs are in response to "threats to the United States by the government of the Russian Federation", and are implementing a presidential order that determined it is "necessary and appropriate" to impose tariffs on India, "which is directly or indirectly importing Russian Federation oil".
Impact on Indian Exports
Based on 2024 trade figures, approximately $48.2 billion worth of Indian merchandise exports to the US will be subject to the additional duties. While some products, including pharmaceuticals, electronics, and petroleum products, are exempt, a large portion of exports will face the full 50% tariff. Key sectors expected to be heavily affected include textiles and apparel, gems and jewelry, seafood (particularly shrimp), and leather goods.
The Global Trade Research Initiative (GTRI) projects a significant decline in India's exports to the US, potentially falling from $86.5 billion in FY2025 to $49.6 billion in FY2026. This 43% decrease could endanger hundreds of thousands of jobs, particularly in labor-intensive sectors. The Federation of Indian Export Organisations (FIEO) estimates that approximately 55% of India's exports to the US will face a pricing disadvantage of 30-35%, making them uncompetitive against rivals from other countries.
India's Response and Strategies
The Indian government has expressed strong opposition to the tariffs, calling them "unfair, unjustified, and unreasonable". Prime Minister Narendra Modi has asserted that India will withstand the economic pressure and continue to strengthen its resilience.
To counter the impact of the tariffs, the government is considering several measures, including:
Geopolitical Implications
Some analysts suggest that the tariffs are a targeted measure against India, rather than a broad policy applied to all countries. They point out that while other nations, including China, import Russian oil, India is being singled out for punishment. Accusations have also been made that the tariffs are due to India not recognizing Trump's self-professed role in bringing about a truce between India and Pakistan.
Winners and Losers
While Indian exporters face significant challenges, other countries with lower tariff rates, such as Vietnam, Bangladesh, Cambodia, and even China and Pakistan, may gain a competitive advantage in the US market. Within India, sectors like pharmaceuticals and electronics are expected to be relatively insulated due to existing exemptions and strong domestic demand.
Long-Term Outlook
Despite the immediate challenges, some experts remain confident in India's long-term economic growth, citing strong domestic consumption and stable macroeconomic fundamentals. S&P Global Ratings believes that the tariffs are unlikely to significantly impact India's long-term growth prospects, as exports to the US account for a small portion of India's GDP. The Indian government is focused on implementing economic reforms and diversifying trade partnerships to mitigate the impact of the tariffs and strengthen its position in the global market.
