India Braces for Trade Turbulence as US Slaps 50% Tariffs on Exports

Starting today at 9:31 am, Indian exporters face one of the most stringent trade measures in recent years. The United States has imposed a hefty 50 per cent tariff on a wide basket of Indian goods, intensifying an already tense economic relationship.

A 25 per cent tariff was already in force, introduced during the Trump administration. Now, an additional 25 per cent duty has been added, mainly in retaliation for India’s ongoing imports of Russian crude oil and defence supplies.

According to the Global Trade Research Initiative (GTRI), the ripple effects will be profound. Nearly two-thirds of India’s exports to the US, worth around $60 billion, fall under this expanded tariff regime. These goods will become significantly more expensive in American markets, undermining their price competitiveness against rivals.

Former ICAI President Ved Jain explained India’s policy dilemma:

“The Russian oil import India is making is because it is economically viable. Now, in case we do not buy Russian oil, we will be economically inefficient, so that’s not possible because the economy will suffer. So, we have to choose between the two evils: either stop Russian oil, then we become economically inefficient and continue exporting. On the other hand, we say, no, we will continue to be economically efficient by buying Russian oil, but we will face the music which comes to us in the shape of exports and some challenges that are there on that part.”

Labour-driven industries such as textiles, gems and jewellery, carpets, shrimp, and furniture are staring at formidable challenges. Small and medium businesses, already operating on wafer-thin margins, are the most vulnerable, with looming fears of large-scale job erosion.

Textile factory owner Bhadresh Dodhia voiced the anxiety in the sector:

“To be honest, it’s a no-go and a non-starter for any importer to take such a big hit on any imports, especially when it comes to the textile value chain—the whole supply chain is working on a very thin margin. To absorb such a heavy increase in the tariff, I am afraid it’s only the consumers who will have to bear [the additional cost] eventually. For the short term, we are all waiting for a miracle to happen and an additional 25 per cent tariff to go away.”

Analysts caution that the repercussions won’t be confined to India alone. American consumers may face higher prices, amplifying inflationary pressures. Economist SP Sharma noted: “I don’t see that this is going to benefit the US economy in any way, because it will increase their inflation trajectory, which is already high, because more than 2 per cent inflation in the US is not tolerable. So, they have to bring down their inflation scenario in the coming times. If the inflation remains high, then the US economy will not be able to grow at a normal rate either. And their growth rate is not that impressive; they grew at around 1.4 per cent during the earlier Trump tenure of 2017 to 2020. So, I believe again, they will face such a slowdown if they are increasing the tariff at such rates of 25 per cent or 50 per cent on the major suppliers.”

At present, India exports goods worth nearly $86.5 billion to the US, but this figure could plummet to $49.6 billion by FY26. While 30 per cent of goods will remain exempt and 4 per cent will draw a 25 per cent duty, nearly 66 per cent—valued at $60.2 billion—will now attract the punitive 50 per cent tariff.

The ultimate beneficiaries will be India’s trade competitors like China, Vietnam, Mexico, and Turkey, ready to capitalize on the vacuum. Since the US accounts for 18 per cent of India’s total merchandise exports, the fallout could trigger unprecedented dislocation across industries.