In a move that has intensified trade tensions between the United States and India, former U.S. President Donald Trump has imposed a 50% tariff on most imports from India. This decision, which took effect on August 27, 2025, is a significant escalation from the 25% tariffs already in place earlier this month. The Trump administration cites India's continued purchases of discounted Russian oil as the primary reason for the increased tariffs, arguing that these transactions indirectly fund Russia's war against Ukraine.

The tariffs have the potential to significantly harm the Indian economy and disrupt global supply chains. While some key products, including pharmaceuticals, electronics, raw drug materials, and refined fuels (amounting to approximately 30% of India's exports to the US), remain duty-free, several sectors are bracing for a major blow.

Sectors Facing the Greatest Impact:

• Textiles and Apparel: This sector, which constitutes a substantial 35% of India's share in the US market, faces a steep 63.9% tariff. Production hubs like Tirupur, Delhi, Surat, and Bengaluru are expected to be particularly hard hit, with some manufacturers already halting production due to decreased cost competitiveness. The US remains India's largest export destination for textiles. Ready-made garment (RMG) exports will see tariffs increase from 13.9% to 61%, making Indian products less competitive against rivals in Bangladesh and Vietnam.
• Gems and Jewelry: This sector, with approximately 40% of its market share in the US, will face tariffs as high as 52.1%. The industry in Surat and Mumbai, which employs a large workforce, is particularly vulnerable. MSMEs in Surat, which control over 80% of diamond exports, will experience adverse effects from the tariff implementation.
• Seafood (Shrimp): Shrimp exports, with a 32% market share in the US, now face a total tariff of 60%. Aquaculture in Visakhapatnam and seafood MSMEs are at substantial risk due to this increase. Indian exporters also face stiff competition from countries like Ecuador, which benefits from its geographical proximity to the US market and a considerably lower 15% tariff.
• Leather: As a labor-intensive sector, leather exports are expected to face significant losses, particularly in West Bengal, where the industry is heavily export-driven.
• Chemicals: The chemical sector, where SMEs hold a 40% market share, is also expected to face significant challenges and encounter robust competition from Japanese and South Korean manufacturers, who benefit from reduced tariff rates.
• Automotive Components: Exports of auto components valued at $3.4 billion now face 25% duties, while remaining auto exports of $3.2 billion encounter 50% tariffs.

Potential Economic Consequences:

The imposition of these tariffs is projected to have a wide-ranging impact on the Indian economy. The Global Trade Research Initiative (GTRI) estimates that India's exports to the US could decline by 43% in FY2026, falling from $86.5 billion to $49.6 billion. A report by SBI suggests that the US tariffs are likely to affect India's GDP by 40-50 basis points and lead to higher input cost inflation. Some economists caution that India's GDP growth could fall below 6% if the 50% tariff remains in place for an extended period. The move could shrink exports from labor-intensive industries by as much as 70 percent, which could threaten thousands of jobs.

India's Response and Mitigation Strategies:

The Indian government has expressed its concern over the tariffs and is exploring various measures to minimize the impact. Prime Minister Narendra Modi has emphasized the importance of "swadeshi" (self-reliance) and urged Indians to support local products. The government is also considering a ₹25,000-crore Export Promotion Mission to provide financial assistance and support to affected exporters. Diversifying into alternative markets, such as China, Latin America, and the Middle East, is also being explored. The government has identified nearly 50 countries for increasing Indian exports, particularly of textiles, food-processed items, leather goods, and marine products. Despite the trade tensions, India has asserted its resilience and vowed to defend its national interests. Trade talks between India and the US are ongoing, although hopes for a trade deal capping tariffs at 15% were previously dashed.