Trump's 50% tariffs on India come into force
- Last updated: August 27, 2025 | 13:59
Steep US tariffs on a range of Indian products took effect on Wednesday, threatening a steep blow to India’s overseas trade in its largest export market.
President Donald Trump had initially announced a 25% tariff on Indian goods. But earlier this month he signed an executive order imposing an additional 25% tariff due to India’s purchases of Russian oil, bringing the combined tariffs imposed by the US on its ally to 50%.
The Indian government estimates the tariffs will impact $48.2 billion worth of exports. Officials have warned the new duties could make shipments to the US commercially unviable, triggering job losses and slower economic growth.
World seeing economic selfishness, says Modi
Prime Minister Narendra Modi has vowed not to yield to the pressure.
"For me, the interests of farmers, small businesses and dairy are topmost. My government will ensure they aren’t impacted,” Modi said at a rally this week in his home state of Gujarat.
Modi said the world was witnessing a "politics of economic selfishness."
'Economic blackmail'
The extreme US tariffs are nothing less than "economic blackmail", but they may also be the shock therapy India needs to break free of complacency and dependence, economists have stressed.
If industry, policymakers, and diplomats act in concert, today's tariff terror could become tomorrow's trigger for transformation, they added.
"The task ahead is difficult, but with sincerity of purpose and concerted efforts, we can -- and we will -- surmount this challenge. What is required is to go full steam ahead and fire on all cylinders," said Manoranjan Sharma, Chief Economist at Infomerics Ratings.
For now, the world is watching a high-stakes drama unfold. Will India bow, break, or bounce back?
From August 27, every Indian export landing on American shores will face a 50 per cent tariff wall.
The pretext? India's continued purchase of Russian oil and arms. The effect? A sledgehammer blow to the world's fastest-growing major economy and a reckless gamble with one of America's most consequential partnerships.
"For decades, India and the US have worked to stitch together an intricate tapestry of trade, technology, defence and diplomacy. Now, with one sweeping stroke, that fabric risks being torn asunder," said Sharma.
Estimates by New Delhi-based think tank Global Trade Research Initiative suggest labour-intensive sectors such as textiles, gems and jewelry, leather goods, food and automobiles will be hit hardest.
"The new tariff regime is a strategic shock that threatens to wipe out India’s long-established presence in the US, causing unemployment in export-driven hubs and weakening its role in the industrial value chain,” said Ajay Srivastava, the think tank's founder and a former Indian trade official.
The US has for now exempted some sectors such as pharmaceuticals and electronic goods from additional tariffs, bringing some relief for India as its exposure in these sectors is significant.
Puran Dawar, a leather footwear exporter in northern India’s Agra city, says the industry would take a substantial hit in the near term unless domestic demand strengthens and other overseas markets buy more Indian goods.
"This is an absolute shock,” said Dawar, whose business with the US has grown in recent years. Dawar’s clients include the major fashion retailer Zara.
Dawar, who is also the regional chairman of the Council for Leather Exports – an export promotion body – said the US should understand that the steep tariffs will hurt its own consumers.
Groups representing exporters warn that new import tariffs could hurt India’s small and medium enterprises that are heavily reliant on the American market.
"It’s a tricky situation. Some product lines will simply become unviable overnight,” said Ajay Sahai, director general of the Federation of Indian Export Organizations.
The tariffs come as the US administration continues to push for greater access to India’s agriculture and dairy sectors.
US team cancels visit to India
India and the US have held five rounds of negotiations for a bilateral trade agreement, but have yet to reach a deal.
A US delegation cancelled plans to visit New Delhi this week for a sixth round of trade talks.
The Indian government has begun working on reforms to boost local consumption and insulate the economy.
Jewels could lose their sparkle
Gems and jewellery, a labour-intensive industry that sparkles in India's export crown, could suddenly go dim.
In the engineering and auto components sector, factories risk slowdowns and workers risk pink slips.
The tariffs could also shave off 0.3-0.5 percentage points of GDP growth.
According to economists, if India uses this defining moment to accelerate 'Make in India 2.0', strengthen supply chains, and diversify export markets, the pain could sow the seeds of long-term gain.
India's manufacturing base, stuck at 14 per cent of GDP, must expand if we are to withstand shocks of this scale, they added.
Despite the latest tariff escalation from the US administration, the Indian corporate bond market is expected to suffer limited lasting damage due to strong corporate fundamentals and access to domestic funding, a report said on Wednesday.
However, high-grade credits could see some knee-jerk spread widening, but Indian corporate credits are expected to remain resilient even as the US import duties on Indian goods soar to unprecedented levels, Barclays Research said in a note.
Agencies