Trump's 50% tariffs on India: Who bears the cost?
What's the story
US President Donald Trump has announced a hefty 25% additional tariff on India, taking the total to a whopping 50%. The move is likely to have a "severe" impact on several Indian export sectors such as leather, chemicals, footwear, gems and jewelry, textiles and shrimp. The new tariffs will come into effect from August 27.
Tariff rationale
Tariff a punishment for India's Russian oil purchases: Trump
The additional tariff is a "penalty" for India's continued purchase of Russian oil, Trump said. He added that only China, India, and Turkey have been hit with such "punishment." The move has raised concerns among industry experts who fear it could make Indian goods extremely expensive in the US and potentially cut US-bound exports by 40-50%.
Export challenges
Shrimp exports to get severely hit
Yogesh Gupta, MD of Megaa Moda, a seafood exporter from Kolkata, said the new tariff will make Indian shrimp expensive in the US market. He noted that Indian shrimp already attracts a 2.49% anti-dumping duty and a 5.77% countervailing duty. After this additional 25%, the total duty would rise to 33.26% from August 27, Gupta said.
Industry response
CITI calls the new tariff 'huge setback'
The Confederation of Indian Textile Industry (CITI) has expressed deep concerns over the potential adverse impact of the effective 50% US tariff rate for India. It said that this announcement is a huge setback for India's textile and apparel exporters, further complicating an already challenging situation. The organization fears it will significantly weaken their ability to compete with other countries in the US market.
Sector impact
Other sectors that will be heavily impacted
Under the new tariff, exports of organic chemicals to the US will face a total duty of 54%. Other sectors that will be heavily impacted include carpets (52.9%), apparel-knitted (63.9%), apparel-woven (60.3%), textiles-made-ups (59%), diamonds-gold and products (52.1%), machinery and mechanical appliances (51.3%), and furniture, bedding, and mattresses (52.3%).
Export impact
Export orders put on hold as buyers reassess sourcing decisions
Colin Shah, MD of Kama Jewelry, said this move is a major blow for Indian exports as nearly 55% of India's shipments to the US market are directly impacted. He added that the 50% reciprocal tariff effectively imposes a cost burden on exporters. Many export orders have already been put on hold as buyers reassess sourcing decisions in light of higher landed costs.
Sectoral impact
India-US trade in FY24 and sectors likely to be hit
In 2024-25, India-US bilateral trade stood at $131.8 billion ($86.5 billion exports and $45.3 billion imports). The sectors likely to bear the brunt of 50% tariff charges include textiles/clothing ($10.3 billion), gems and jewelry ($12 billion), shrimp ($2.24 billion), leather and footwear ($1.18 billion), chemicals ($2.34 billion) and electrical and mechanical machinery (about $9 billion).
Impact
Tariffs to affect both India and US economies
Indian exporters, especially small and mid-sized manufacturers, will face the immediate impact of the 50% US tariffs. Many may see reduced orders or tighter margins as American buyers renegotiate prices or cancel deals. To cope, US importers are likely to pass on the cost to consumers, making Indian products more expensive in the US retail market. Over time, India's export competitiveness could weaken, leading to lower earnings, job losses in key sectors, and increased strain on bilateral trade relations.