The impact of Trump’s tariffs on India


 The impact of Trump’s tariffs on India

Overview: What Happened?

  • Tariff Escalation: In August 2025, the Trump administration doubled tariffs on Indian goods—starting with a 25% "reciprocal" tariff and adding another 25% in retaliation for India's continued purchase of Russian oil—bringing the total tariff to 50%, one of the steepest levies ever imposed on a trade partner.

  • Scale of Impact: These tariffs affect approximately 55–66% of India’s annual exports to the U.S., which are valued around $86–87 billion.

Economic Consequences for India

1. Export Collapse in Key Sectors

  • Labour-intensive industries such as textiles, apparel, gems, jewellery, carpets, leather goods, and seafood could see a 70% plunge in exports. Overall, shipments to the U.S. may drop from $86.5 billion to about $50 billion.

2. GDP Growth Hit

  • Economists estimate the tariffs could shave off up to 1 percentage point from India’s GDP growth this fiscal year. Some assessments suggest a reduction of around 0.5% or more, depending on duration.

3. Job Loss Risk

  • Job-heavy sectors are particularly at risk:
    • Textiles and clothing: US accounts for one-third of India’s exports in this segment; 70% impact expected.
    • SMEs and handicraft exporters could face severe challenges in remaining competitive.

4. Strain on Corporate Players

  • Prominent Indian conglomerates are facing notable threats:
    • Reliance Industries: Though exempt in energy trade, its solar panel exports may suffer.
    • Adani Group: Solar exports hit hard as 90% went to the U.S. market.
    • ArcelorMittal: Expects a $150 million hit to core profits.
    • Royal Enfield (Eicher Motors): Rushed shipments pre-tariff and exploring re-routing options.

5. Equity Market Response

  • Investors have pulled about $15 billion from Indian equities in 2025 due to growing global trade risks, weak corporate growth, and tariff pressures.

6. Loss Vs. Gain

  • While Indian refiners save roughly $3.5 billion annually by buying discounted Russian oil, trade losses from U.S. tariffs potentially outweigh these gains.
  • Analysts, including Chris Wood of Jefferies, forecast an economic blow of $55–60 billion from the tariff regime.

Indian Government & Industry Responses

Domestic Measures

  • Fiscal relief: GST overhaul (GST 2.0) to lower tax rates and boost consumer demand.
  • Tax cuts: Reduced GST brackets, covering everyday goods—effective from September 22. Encouragement for domestic spending and small businesses.

Export Diversification

  • Exporters urged to pivot toward Europe, Latin America, Africa, and Southeast Asia, while leveraging new FTAs.
  • Textiles: SIMA extended cotton duty exemption to stabilize raw material costs.
  • Industry pushes advocated balanced reforms to stay competitive.

Geopolitical Fallout

  • Strategic strain: The dispute threatens decades of growing U.S.–India strategic cooperation, including the Quad and defense ties.

  • Diplomatic realignments: India is seen moving closer to China and Russia, embracing multipolar relationships for strategic autonomy.

  • Mixed messages from U.S.: Internal disagreement between Trump’s aggressive stance and trade diplomats seeking compromise, impacting perceptions in Delhi.

Summary Table

Area Key Impact Highlights
Exports Collapse in textiles, gems, apparel (up to –70%); total exports down ~42%
GDP Growth Reduction by 0.5–1 percentage point expected
Jobs Risk of heavy layoffs in export-oriented sectors
Corporates Profit hits for Reliance, Adani, ArcelorMittal, Eicher Motors
Investor Sentiment $15B outflow from equities due to uncertainty
Government Actions GST relief, diversification, tax revisions
Geopolitics Strained U.S.–India ties, tilt towards China/Russia

Final Thoughts

Trump’s 50% tariffs are a substantial economic and strategic shock for India, impacting vital export sectors, growth projections, corporate profits, and investor confidence. While Delhi wages fiscal reforms, trade diversification, and industrial support, the broader implications for U.S.–India strategic ties are becoming increasingly consequential.


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