US Tariffs On Indian Goods Rise To 50%

The United States has sharply raised tariffs on Indian goods to 50% starting August 27, 2025, triggering immediate concerns across Indian export sectors and raising the specter of economic and strategic fallout for both countries.

Impact on Indian Export Sectors

Labour-intensive sectors—particularly textiles, gems and jewellery, and seafood—are expected to feel the brunt of these steep tariffs, with exporters warning of moderate to severe disruption. For instance:

• Textiles: The US is India’s largest textile export market, and the tariff shock threatens recent gains India has made as China’s share shrinks. Exporters are bracing for lost orders and squeezed margins.

• Gems and Jewellery: Nearly a third of the segment’s $28.5 billion annual exports head to the US. Doubling tariffs may cause significant turbulence in an industry that is already grappling with global demand slowdowns.

• Seafood: Over half of Indian shrimp exports are shipped to the US. With tariffs now at 50%, industry representatives fear large-scale order cancellations and diminished competitiveness versus suppliers like Ecuador.

Conversely, some areas—like pharmaceuticals, smartphones, and steel—remain shielded from the new measures due to specific exemptions, existing tariff frameworks, or steady domestic consumption.

Economic Risks for India and Global Competitors

According to an SBI Research report, the tariffs threaten $45 billion in Indian exports and could tip India’s trade surplus with the US into deficit if negotiations fail. India’s lost competitiveness may result in orders moving to countries like China (30% US tariff), Vietnam (20%), Indonesia (19%), and Japan (15%), all of whom now enjoy a relative price advantage.tim  

Moody’s Analytics added that the drop in export demand from India’s largest client could slow GDP growth by 0.3–0.7 percentage points for 2025 and stall efforts to build a robust manufacturing base. The agency also noted that attempts to price-cut to retain US orders may undermine margins, wage growth, and sector investment.

Ramifications for the US Economy

The tariff escalation is also expected to boomerang on the US economy, shaving US GDP growth by 40–50 basis points, according to SBI Research. Higher import costs will likely fuel inflation, especially in price-sensitive sectors like electronics, automobiles, and consumer durables. Analysts now project that US inflation will remain above the Federal Reserve’s 2% target through 2026 as these pressures persist.ndtv+1

Geopolitical Fallout

Strategic ties between the two democracies could fray under tariff tensions. The United States has prioritized deepening relations with India via platforms like the Quad, yet sudden trade escalations threaten progress. The rift comes as India continues substantial oil purchases from Russia—a key rationale cited for the punitive duties

Exempted Sectors Offer Relief

While most exports are hit, Indian pharmaceutical products remain exempt. These exports comprise about 6% of US pharma imports, with 40% of total Indian pharma exports headed to the US, offering a crucial lifeline amid deteriorating trade terms.

Conclusion

The US decision to double tariffs on Indian goods to 50% marks a turning point in bilateral trade, disrupting key Indian export sectors and posing risks for both economies in inflation, growth, and strategic collaboration. In the weeks ahead, the focus will be on diplomatic negotiations and market adaptations as both nations seek to protect critical economic and political interests.