In a move that’s sending shockwaves through India’s export economy, the United States has officially implemented a steep 50 percent tariff on a wide range of Indian goods starting August 27, 2025. The decision, driven by geopolitical tensions and trade recalibrations under former President Donald Trump’s renewed trade agenda, is expected to hit labour-intensive sectors the hardest—particularly textiles, gems and jewellery, seafood, and furniture.
Here’s a comprehensive breakdown of the impact, sectoral fallout, and what lies ahead for Indian exporters.
1. What the Tariff Means
- The 50 percent tariff is a combination of two levies: a 25 percent duty announced in July and an additional 25 percent penalty imposed in early August
- The penalty targets India’s continued purchases of Russian oil and defense equipment, which Washington views as undermining its sanctions regime
- The new rates apply to goods “entered for consumption” in the US from 12:01 am EDT on August 27, as per the Department of Homeland Security’s directive
- This hike takes effective tariff rates on some categories to over 60 percent, rendering many Indian products uncompetitive in the US market
2. Sectors Hit Hardest
- Textiles and apparel: India exports over $10 billion worth of textiles to the US annually, with Washington being its largest market. The Confederation of Indian Textile Industry has expressed deep concern over the loss of competitiveness
- Gems and jewellery: With $9.2 billion in exports to the US last year, this sector faces a major blow. Polished diamonds and handcrafted jewellery are particularly vulnerable
- Seafood: Shrimp exports, which rely heavily on US buyers, could shrink drastically. The US accounts for nearly half of India’s shrimp revenue
- Carpets, furniture, handicrafts, and leather goods are also expected to see a sharp decline in demand due to price hikes
3. Economic Fallout and Job Risks
- According to the Global Trade Research Initiative (GTRI), nearly two-thirds of India’s exports to the US—worth $60.2 billion—will be affected
- Export volumes in key sectors could shrink by up to 70 percent, jeopardizing millions of jobs, especially in MSMEs
- India’s merchandise exports to the US may fall from $86.5 billion in FY25 to $49.6 billion in FY26 if tariffs persist
- The textile and gems sectors alone employ millions across India, and industry bodies are urging the government to offer relief measures similar to COVID-era support
4. Competitive Displacement
- Countries like Vietnam, Bangladesh, Cambodia, and Mexico are poised to benefit from India’s tariff-induced slowdown
- These nations currently face lower or no tariffs and are already being approached by US buyers seeking alternatives
- India’s rising share in US textile imports—from 6 percent to 9 percent over five years—now risks reversal as buyers pivot to cheaper suppliers
5. Government Response and Diplomatic Tensions
- The Prime Minister’s Office has convened a high-level meeting to assess the impact and explore countermeasures
- India has called the tariffs unjust and unreasonable, while the Kremlin defended India’s right to choose its trade partners
- Talks over a Free Trade Agreement between India and the US remain stalled, adding to the diplomatic strain
6. What’s Next for Exporters
- Industry leaders are urging New Delhi to negotiate tariff relief or offer reciprocal concessions
- Exporters are exploring diversification into European and Southeast Asian markets
- Some sectors are lobbying for raw material duty cuts to offset rising costs and retain margins
Sources: Indian Express, Firstpost, MSN News, NewsX, India Today, Times of India
