Sweeping US Tariffs to Upset Indian Exports
In a development that’s shaken India’s export industry, US President Donald Trump has imposed a 25% duty on a wide range of goods imported from India. Coming into effect on August 1, 2025, the new tariffs hit some of the nation’s most lucrative export sectors and are being looked at not only as a protectionist measure, but also as an act of politics with regard to underlying geopolitical tensions.
The move has caused tremors in Indian business communities, with fears growing about losses in employment, export earnings, and wider economic implications. India’s $87 billion trade relationship with the US, its biggest trading partner, now hangs in the balance.
Russia Ties Add a Political Edge
Although Trump framed the tariffs as required to offset India’s “obnoxious” non-tariff barriers and defend American supply chains, most view the action as being motivated by retaliation for India’s increasing defence and energy relations with Russia. In that background, the trade penalties take on a sharper diplomatic edge, making it hard to categorize them as ordinary economic tensions.
Key Sectors Bear the Brunt
The industries worst affected by the 25% duty are automobiles, auto parts, steel, aluminium, smart phones, solar panels, marine products, gems, jewellery, and processed agriculture commodities. Pharmaceuticals, semiconductors, and key minerals have been exempted, providing relief.
Industry players are expecting a tough time ahead. Rahul Ahluwalia, the Founder-Director at the Foundation for Economic Development, noted that India’s primary exports to America are pharma, electronics, gems and jewellery, and textiles. “If the exemptions on pharma and electronics continue, then gems, jewellery, and textiles will suffer the maximum damage,” he added.
Immediate Impact on Businesses
For motor vehicle titans such as Tata Motors and Bharat Forge, a direct fall in US demand is anticipated, especially for high-end vehicles and precision parts. Electronics makers and solar panel builders are also anticipating margin compressions in already slim margins.
Jewellers and marine exporters, who export more than $9 billion worth of merchandise every year to the US, now have a difficult decision to make absorb the additional costs, pass them on to customers, or search for alternative markets. The textile and apparel industry has a dual forecast. While low-cost Indian producers might gain if US tariffs on Chinese or Vietnamese imports remain in place, higher-priced Indian players might lose market share in the fashion premium market.
Wider Economic Impact Feared
Economists fear that if the tariffs continue up to FY26, India’s GDP would decline by 0.2% to 0.5%. Maharashtra, Gujarat, Tamil Nadu, and Karnataka, which are major export states, are most exposed. The hit to MSMEs in these states could be substantial.
Ahluwalia cautioned that the long-term implications should be remembered. “This places us in a disadvantageous position vis-a-vis Vietnam and China. India must address this promptly and coordinate trade policy with long-term reforms to remain competitive internationally.”
Talks May Offer a Way Out
In spite of the tension, there is still hope. Agneshwar Sen, Trade Policy Leader at EY India, termed the tariff increase “an unfortunate development,” particularly given the increasing strategic engagements of India with the US in recent years.
“But both sides remain engaged in active negotiations,” Sen said. “A US delegation is expected in India this August to move forward on a comprehensive trade agreement. I’m confident we’ll reach a mutually beneficial resolution soon.”
A Time for Strategic Adaptation
With supply chains around the world in turmoil, some observers expect this disruption to be a turning point as well urging Indian exporters to diversify and become more modern. In the meantime, however, companies have to get nimble fast, hold on to US buyers, and watch for new opportunities elsewhere.
With trade negotiations set to resume later this fall, the result will depend as much on geopolitics as it will on economic give-and-take.
