As of today, August 27, 2025, India is bracing for a significant export shock as cumulative US tariffs of 50% take effect on key Indian goods. This move, linked to India's continued purchases of Russian oil and defense equipment, is anticipated to significantly impact Indian exports to the United States.

Impact on Exports and GDP

The newly imposed tariffs could slash India's exports to the US by an estimated 43%. Of the approximately $86.5 billion in goods India exports to the US annually, around $60.2 billion, or about two-thirds, will now be subject to the 50% tariff. While some sectors like pharmaceuticals, electronics, and petroleum are exempt, a substantial portion of exports will be affected. Economists predict that these tariffs could shave 0.4–0.5% off India's GDP growth in FY26, with potential repercussions for private investment, labor markets, and domestic manufacturing. Some estimates predict a decline in overall exports to the US from $86.5 billion in FY25 to $49.6 billion in FY26.

Vulnerable Sectors

Labor-intensive sectors are expected to bear the brunt of the tariffs. These include textiles, apparel, gems and jewelry, seafood, and leather. Ajay Srivastava, founder of the Global Trade Research Initiative (GTRI), warns that exports in these sectors could collapse by 70%, potentially falling from $60.2 billion to $18.6 billion. The tariff implementation is expected to significantly impact micro, small, and medium enterprises (MSMEs), which account for approximately 45% of India's total exports.

• Textiles and Apparel: The apparel industry, with $10.3 billion in exports to the US, was already struggling under the earlier 25% duty. The new levy could push Indian apparel out of the US market, creating a significant disadvantage compared to competitors in Bangladesh, Vietnam, and Sri Lanka. Some textile manufacturers in Tirupur, Noida, and Surat have reportedly halted production due to worsening cost competitiveness.
• Gems and Jewelry: This sector has the highest exposure to the US, with exports worth approximately $10 billion. Surat's gems and jewelry industry, which controls over 80% of diamond exports, is expected to face adverse effects.
• Seafood: With the US market absorbing nearly 40% of Indian seafood exports, particularly shrimps, the tariff increase poses risks of stockpile losses, disrupted supply chains, and distress for farmers.

Government and Industry Responses

The Indian government is reportedly promoting a "Swadeshi" mantra, encouraging citizens to buy local goods to reduce reliance on exports. Reserve Bank of India Governor Sanjay Malhotra has stated the central bank will support sectors adversely affected by the tariffs. Industry bodies have suggested strategies such as negotiating bundled pricing with major US retailers, developing premium product variants, redirecting trade to other markets, and encouraging joint ventures for production in the US. Some have urged the government to provide immediate support to the textile industry. Foreign Minister S. Jaishankar has stated that trade talks are ongoing, also highlighting that the US scrutiny of India's Russian oil imports is not equally applied to China or the EU.

Potential Beneficiaries

The imposition of tariffs on Indian goods could benefit other countries. China, Vietnam, and Mexico are positioned to potentially capture market share in sectors where Indian exports now face higher tariffs.

The implementation of these tariffs marks a significant moment for India's export landscape, requiring strategic adjustments to mitigate the impact on employment, economic growth, and its role in the global industrial value chain.