The United States has increased tariffs on many Indian products from 25% to 50%, following India’s purchases of Russian oil. The new duties affect sectors including garments, gems and jewellery, footwear, sporting goods, furniture, and chemicals. Certain industries, such as pharmaceuticals and computer chips, remain exempt.
The tariffs are part of US President Donald Trump’s strategy to pressure India over energy purchases amid the Ukraine conflict. While India-US trade relations have expanded, disputes over market access remain sensitive. Talks on a large-scale trade agreement were launched in February, aiming to boost annual trade to $500 billion by 2030, but details are still under negotiation.
India Braces for Economic Impact
The Indian government estimates that exports worth $48.2 billion could be affected. Officials warn that higher tariffs may make exports to the US commercially unviable, potentially slowing economic growth and causing job losses.
Former Foreign Secretary Harsh Vardhan Shringla said India is seeking alternative markets through Free Trade Agreements with Australia, UAE, the UK, and soon the European Union. He emphasized the importance of India-US relations, noting that the appointment of Sergio Gor as US Ambassador is a positive step.
Potential Effect on GDP and Competitiveness
An SBI Research report predicts that the tariffs could reduce India’s GDP by 40–50 bps and increase input costs. With US tariffs at 50%, India’s exports may lose competitiveness compared to countries like China, Vietnam, Indonesia, and Japan.
The textiles sector, where India has gained US market share over the past five years, may face setbacks. Similarly, the gems and jewellery industry, heavily reliant on the US market, is preparing for disruptions. Shrimp exporters, who send more than half of their output to the US, also fear losses and order cancellations.
Looking Ahead
Despite the challenges, India is exploring diversified markets and expects ongoing trade negotiations to help restore confidence. Strategic partnerships and long-term agreements may cushion the impact of US tariffs and help maintain India’s export growth.