Trump's 50% tariffs on India kick in
What's the story
United States President Donald Trump's additional 25% tariffs on Indian goods came into effect on Wednesday at 9:31am, bringing the total punitive levies to 50%. Trump slapped the extra 25% tariff, citing India's purchases of Russian oil. The tariffs will affect Indian exports worth $60.2 billion, according to the Global Trade Research Initiative (GTRI). Labor-intensive sectors such as textiles, gems and jewelry, shrimp, carpets and furniture are likely to see shipments drop by up to 70%, impacting millions of workers.
Economic impact
Exports could decline to $49.6 billion next year
The tariffs cover about 66% of India's US exports, which were worth $86.5 billion in FY 2025. If the tariffs remain, exports could decline to $49.6 billion next year, with competitors such as China, Vietnam and Mexico likely to take advantage of the gap in the US market. Textiles, gems, jewelry, shrimp exports, and leather items are among the industries hit hard. However, tariff exemptions remain in place for sectors that could be struck separately, like pharmaceuticals and computer chips.
Trade relations
Moody's Analytics warns of 'hurt' to India
Moody's Analytics has warned that the new US tariffs will sharply reduce demand for Indian exports. The report said, "The drop in sales to their largest client will hurt," adding that the tariffs have left countries across Europe and Asia-Pacific "feeling bruised." Some firms may cut prices to maintain sales volumes, but this could squeeze margins and limit wage growth.
Diplomatic tensions
Tariff tensions may affect broader strategic ties
The tariff escalation could also affect broader strategic ties between the US and India. The US has long sought to bring India closer through initiatives like the Quad, a security grouping with Australia and Japan to counter China. Earlier this year, India's Foreign Affairs Minister S Jaishankar expressed willingness to strengthen the Quad's defense and security focus. Tariff tensions now jeopardize these efforts.
Domestic response
PM Modi urges citizens to prioritize swadeshi goods
While the extra tariff was announced at the beginning of August, New Delhi has refused to back down, with Prime Minister Narendra Modi saying that India will not compromise on the interests of farmers, small industries and domestic producers. India has yet to issue a directive on oil purchases from Russia, but New Delhi's envoy to Moscow stated that India will continue to purchase oil from sources offering the "best deal."