Trump's 50% tariff shock hits India: New Delhi faces one of its toughest trade blows in years

Indian exporters are facing one of the toughest trade shocks in years as the United States on Wednesday officially imposed an additional 25% tariff on key goods from India, adding to an existing 25% duty and bringing the total US levy to 50%.

The tariffs apply to products “entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 am EDT on August 27, 2025” (9:31 am IST), according to the Department of Homeland Security.

The move is linked to India’s continued purchases of Russian oil and defence equipment. White House trade adviser Peter Navarro and US Treasury Secretary Scott Bessent have accused India of indirectly funding Russia’s war in Ukraine through its oil imports. Bessent noted earlier this month that India now sources 42% of its oil from Russia, up from under 1% before the conflict.

“The government has no hope for any immediate relief or delay in US tariffs,” a Commerce Ministry official told Reuters on condition of anonymity. He added that exporters affected by the tariffs will receive financial assistance and support to diversify into markets such as China, Latin America, and the Middle East.

Also Read: Trump’s 50% tariff shock hits India – what it means for growth, jobs, and hardest-hit sectors

“The government has identified nearly 50 countries for increasing Indian exports, particularly of textiles, food-processed items, leather goods, and marine products,” the official said.

Prime Minister Narendra Modi, speaking in Ahmedabad, described the current global trade climate as one defined by “economic selfishness,” where nations prioritise their own interests. He emphasised India’s resilience, saying, “No matter how high the pressure, India will continue to build its strength to withstand it.”

Modi underscored India’s determination to safeguard domestic interests. “The interests of farmers, cattle rearers, and small-scale industries are paramount. The pressure may increase, but we will bear it,” he said, invoking the legacies of Lord Krishna and Mahatma Gandhi.

Exports under threat
As per GTRI, India exports around $86.5 billion in goods to the US each year. Of this, roughly $60.2 billion, about two-thirds, will now face a 50% tariff. An additional $3.4 billion in auto parts remains at the existing 25% duty, while $27.6 billion, mainly in pharmaceuticals, electronics, and petroleum, is exempt, according to the Global Trade Research Initiative (GTRI).

Labour-intensive sectors such as textiles, apparel, gems and jewellery, seafood, and leather are most exposed. Metals, including aluminium, steel, and copper, continue under the existing 25% duty.

Ajay Srivastava, founder of GTRI, warns that exports in the affected sectors could collapse by 70%, falling from $60.2 billion to $18.6 billion. Overall shipments to the US could decline by 43%, putting hundreds of thousands of jobs in India’s export hubs at risk.

Economists estimate the tariffs could shave 0.4–0.5% off GDP growth in FY26, with effects felt on private investment, labour markets, and domestic manufacturing.

Also Read: Centre readies export shield as US tariffs set to hit $48 bn trade

Foreign Minister S. Jaishankar said last week that trade talks continue, highlighting that US scrutiny of India’s Russian oil imports is not applied equally to China or the EU. Reuters reported that three refining sources confirmed companies will continue buying Russian oil based on economics, despite the tariffs.

“There is no directive from the government so far regarding oil purchases from Russia,” Jaishankar said. He added that India will continue to make strategic energy choices, dismissing claims that the tariff is solely an “oil dispute.”

Earlier this year, Indian officials were confident a deal with the US could limit tariffs to 15%, but negotiations broke down amid political misjudgments and missed signals. Bilateral trade between the US and India totals over $190 billion.

How India is preparing for Trump's tariffs
The Centre has ruled out retaliation but is working on measures to soften the blow. Officials said meetings with industry are ongoing, and a ₹25,000-crore Export Promotion Mission is under consideration. The plan includes trade finance, regulatory support, standards alignment, ecommerce hubs, warehousing, and better branding for “Brand India.”

“The Export Promotion Mission and other proposals such as SEZ amendments are being considered,” said a senior official. Another official added, “Deliberations in the government have been ongoing and meetings with the industry are also taking place.”

India and the US are negotiating a bilateral trade agreement (BTA). However, American negotiators have postponed their India visit that was scheduled for August 25.

Commerce and industry minister Piyush Goyal, at the ET World Leaders Forum last week, said India’s relationship with the US is “very consequential,” but national interest remains the guiding factor. “We are looking at a GST revamp. We'll see how we can support many of these labour-intensive sectors, like food processing, textile, through the GST framework to give a boost to domestic demand,” he said.

Looking ahead
The government is considering GST adjustments, reforms, and incentives to cushion the impact. Bilateral trade discussions may offer some relief, but for now, Indian exporters face one of the harshest trade barriers in recent memory.

“This is a significant shock to India’s export-led growth,” said Ajay Srivastava, founder of GTRI. “The next few months will test the resilience of our industries, our workforce, and our trade diplomacy.”