50% US tariffs force India to rethink trade, jobs, and market strategy

India’s exporters are reeling after the United States imposed a sweeping 50 per cent tariff on Indian goods from 27 August 2025, citing India’s continued purchases of Russian oil and defense equipment. The punitive measure, formalised under Executive Order 14329, affects nearly two-thirds of India’s $86.5 billion annual US exports, threatening jobs, market share, and global competitiveness.

Scope and exemptions

The tariff covers goods “entered for consumption or withdrawn from warehouse for consumption” after 12:01 am EDT on 27 August. Shipments in transit before 17 September are exempt. Exempt categories include pharmaceuticals, steel, aluminium, passenger vehicles, copper products, and informational materials. Auto components face a 25 per cent duty, while most other items face the full 50 per cent rate.

Sectoral turmoil

• Textiles and apparel: Firms in Tiruppur, Noida, and Surat, including Sudhir Sekhri’s company representing the Apparel Export Promotion Council, are offering deep discounts and cutting shifts to retain buyers. $10.8 billion worth of exports are at risk, with airlifted T-shirt shipments trying to beat the tariff deadline.

• Gems and jewellery: Surat and Mumbai exporters, led by Colin Shah, face $9.9 billion in exports now exposed to over 52 per cent duties. Domestic sales are rising, but US orders have stalled, prompting layoffs of contract staff.

• Shrimp and marine products: Andhra Pradesh processors rushed shipments in July and August. US buyers are pressing for lower prices, while Ecuador, whose shrimp faces only 15 per cent duty, may capture market share.

• Footwear and leather: Agra’s Dawar Group and Chennai’s Farida Group are offering heavy discounts and exploring Russia and CIS markets. Smaller exporters face intensified domestic and international competition.

• Carpets, food, and agriculture: Exporters of basmati rice, tea, spices, and carpets are witnessing US buyers shift to countries with lower tariffs, including Turkey, Vietnam, Pakistan, and Thailand.

• Auto components and chemicals: Exports worth $3.4 billion in auto parts and $2.7 billion in organic chemicals now face 25–50 per cent duties, prompting postponed expansion and fast-tracked inventory shipments to US ports.

In a reaction on X, Congress leader Jairam Ramesh said, "The Trump double tariff has now come into effect, and it will undoubtedly hit our labour-intensive exports to the US—particularly textiles, gems and jewellery, leather, marine products, and engineering. On top of this, the US Commerce Secretary has voiced concerns over the H1B visa system, which mainly benefits Indian IT professionals. What Prime Minister Modi hailed earlier this year as his ‘MEGA’ formula—MAGA plus MIGA—has now turned into a ‘MAHA’ headache for India."

Economic and employment impact

Analysts predict exports from affected sectors could fall by up to 70 per cent, shrinking overall US shipments by 43 per cent and risking hundreds of thousands of jobs. Layoffs are reported across gems, jewellery, garments, and shrimp processing units. The GDP impact for FY26 is estimated at 0.4–0.5 per cent.

Strategic responses

Exporters are:

• Offering deep discounts and revising contracts to retain US buyers.

• Exploring alternative markets in Russia, CIS countries, Latin America, Africa, and China.

• Pivoting to domestic sales where possible.

• Frontloading shipments before the tariff deadline to minimise immediate losses.

The Indian government is accelerating trade talks with the UK and EU, offering GST reductions and production-linked incentives, and promoting “Made in India” initiatives to buffer affected sectors.

Talks stalled

Bilateral trade negotiations have stalled, with a US delegation visit to Delhi postponed. The tariffs may sour investment relations and strategic cooperation, while competitors like Vietnam, Bangladesh, and Cambodia stand ready to capture Indian market share. India has denounced the duties as “unfair, unjustified, and unreasonable,” pledging to protect national interests.

With textiles ($16 billion), gems and jewellery ($9 billion), and leather ($4 billion) now fully exposed, exporters face a critical period. Pharmaceuticals ($11 billion), electronics ($7 billion), and petroleum products ($9 billion) remain exempt, while auto parts ($3.4 billion) face moderate risk.

The new tariffs are forcing rapid market diversification and strategic recalibration, as the human and economic toll of this trade shock becomes increasingly apparent.