What Are the Effects of Trump Tariffs on India’s Economy?

Trump tariffs—doubling to 50% on most Indian exports as of August 27, 2025—have delivered a significant shock to India’s economy, targeting key sectors and shaking US-India trade relations. These tariffs are a direct response to India’s ongoing purchases of Russian oil and are among the highest ever imposed by the US on any country.

Key Effects of Trump’s Tariffs on India

Impacted Sectors

• Textiles, Gems, and Jewelry: These are among the hardest hit, with potential export declines of over 70%, threatening hundreds of thousands of jobs in labor-intensive industries.
• Leather Goods, Footwear, Furniture, Chemicals, Carpets, and Automobiles: Also face steep duties, which could render exports commercially unviable for many small and medium businesses.
• Seafood: Shrimp exports are specifically mentioned as facing substantial risk.

Economic Consequences

• Loss of US Market Access: With $48–60 billion worth of Indian exports now affected, the US may no longer remain India’s top trade partner. Indian exports to the US could fall from $86.5 billion to about $50 billion by 2026.
• Job Losses and Growth Slowdown: Hundreds of thousands of export-driven jobs are at risk, particularly in textiles, jewelry, and food processing hubs. Estimates suggest a GDP drop of up to 1%, or roughly $36 billion in lost output.
• Currency and Markets: News of the tariffs caused sharp drops in the rupee and Indian stock markets earlier this week, amplifying economic uncertainty.
• Strategic Shift: The Modi government is now accelerating its push for self-reliance (“Aatmanirbhar Bharat”), promising tax relief and urging the private sector to find alternative export markets.

Geopolitical and Policy Context

• Russian Oil Trigger: The tariffs stem specifically from India’s increased Russian oil imports amidst the Ukraine conflict, which the US sees as supporting Russia’s military operations.
• Negotiation Breakdown: Multiple rounds of US-India talks failed, with Washington demanding an end to Russian energy purchases—a demand Delhi refused, citing national energy security for its 1.4 billion citizens.
• Possible Mitigation: Indian authorities are now considering export subsidies, financial support, and market diversification plans to offset the loss. Talks for tariff relief or exemptions on certain shipments are ongoing, but outcomes are uncertain.

Summary Table: Tariff Effects by Sector

Outlook

Trump’s tariffs create immediate pain for Indian exporters and threaten to cool one of the world’s fastest-growing economies. The move is likely to reshape supply chains, accelerate India’s domestic reforms, and test the resilience of US-India strategic ties for years to come