U.S. President Donald Trump’s 50% tariff on Indian goods took effect on Wednesday. The move is set to hit trade worth billions of dollars and could threaten thousands of jobs in India, the world’s most populous country.
The U.S. had first placed a 25% tariff on Indian goods on July 30, then added another 25% a week later, saying the action was linked to India’s purchase of Russian oil.
The new 50% tariff, among the highest ever imposed by the U.S., will cover a wide range of goods, from gems and jewellery to clothing, footwear, furniture, and industrial chemicals.
How Will Additional Tariffs Impact India-US Bilateral Trade Worth USD 212 billion
This steep tariff will hurt India’s ability to compete with China in exports and could weaken Prime Minister Narendra Modi’s push to make India a global manufacturing hub. Until recently, the U.S. was India’s biggest trading partner, with annual trade between the two countries worth $212 billion.
According to the Global Trade Research Initiative (GTRI), a think tank in New Delhi, India’s exports to the U.S. could drop from $86.5 billion this year to about $50 billion by 2026 due to the new tariffs.
The Global Trade Research Initiative (GTRI) said that industries such as textiles, gems and jewellery, shrimp, and carpets will be hit the hardest, with exports from these sectors likely to shrink by as much as 70%. This may threaten hundreds of thousands of jobs.
Several Sectors Could Bear the Brunt of Additional Tariffs
MK Venu, founding editor of The Wire, said that sectors such as textiles, garments, gems and jewellery, fisheries, leather goods, and handicrafts would be hit the hardest. These are “very labour-intensive” sectors made up mostly of small businesses that cannot absorb such losses. According to Venu, many of these companies will lose out to competitors in Vietnam, Bangladesh, Pakistan, and other East Asian countries.
The Indian pharmaceutical industry has been spared from immediate tariff hikes because of its importance in supplying affordable generic medicines to the U.S., where about half of all generic drug imports come from India. In 2024, India exported around $8.7 billion worth of pharmaceuticals to the U.S.
However, other sectors such as semiconductors and consumer electronics will face separate, sector-specific U.S. tariffs. Similarly, aluminium and steel products, as well as passenger vehicles, will also be subject to their own tariff rates, outside of the 50% blanket tariff.
Narendra Modi Vows to Safeguard
Prime Minister Narendra Modi has promised to protect farmers, cut taxes, and promote self-reliance in response to the new U.S. tariffs.
Earlier this year, the government announced a $12 billion income tax relief package. Modi has also hinted at a “big tax bonanza” for businesses soon. Plans are underway to reduce and simplify the goods and services tax (GST).
In addition, salaries for nearly five million government employees and pensions for 6.8 million retirees will rise next year. These measures could help India’s economy keep growing despite the tariff shock.
Indian Government to Provide Financial Support
A commerce ministry official told Reuters that exporters hit by tariffs would get financial aid and other support to explore new markets in Latin America and the Middle East.
However, MK Venu, former editor of the Financial Express, said that while both the prime minister and the central bank have given assurances, there is no concrete policy in place. He argued that India failed to prepare for the crisis. “India should have had a plan. We knew Trump would punish India for buying Russian oil,” he said.
Indian policymakers may now be forced to reduce dependence on the U.S. market, local media reported. New Delhi is also considering joining multilateral trade agreements it had earlier resisted. At the same time, the government is pushing bilateral trade deals with several countries and aims to finalize a pact with the European Union by the end of this year.
The International Monetary Fund had earlier predicted India’s economy would grow by 6.4% in 2026, but that outlook could now change.
Donald Trump Imposed Tariffs After India Continued Russian Oil Import
Talks to end the trade dispute collapsed after five rounds of negotiations, as U.S. President Donald Trump continued to demand that India stop importing Russian oil and gas.
Despite the threat of higher U.S. tariffs, India has kept buying Russian crude this year, though in smaller amounts than before. New Delhi has also been caught in the middle of the rivalry between Russia and the West.
U.S. Treasury Secretary Scott Bessent accused India of helping fund Russia’s war in Ukraine. He noted that India’s Russian oil imports rose from just 1% before the war to 37% now, and claimed that India was “profiteering.”
India’s foreign ministry rejected the charge, saying it would “take all necessary steps to protect national interests.” Officials stressed that buying Russian oil was based on market prices and the energy needs of India’s 1.4 billion people.
India Accused US of Being Unfair
New Delhi has also accused Washington of unfairly singling out India, while the European Union and China, both of which still buy Russian energy, have managed to strike trade deals with Trump.
According to Trump, India’s steep tariffs remain a major hurdle for American companies. “India has been, to us, just about the highest-tariffed nation anywhere in the world. It’s very hard to sell to India because they have trade barriers and very strong tariffs,” Trump said during Prime Minister Modi’s visit to Washington in February.
New Delhi agreed to cut tariffs on some U.S. industrial goods and boost defence and fuel purchases to ease President Trump’s concerns about trade imbalances. But India did not open its large farming and dairy markets to imports from the U.S. that are cheaper.
For context, at the end of 2024 India’s average tariff on farm imports was 39%, compared to just 4% in the U.S. Trump was angered by this gap.
Last year, trade between India and the U.S. was about $212 billion, with India enjoying a $46 billion surplus.
Trump’s hard line has also pushed India to repair relations with China, its neighbour and one of its largest trading partners, with bilateral trade worth about $136 billion. At the same time, India is preparing to welcome Russian President Vladimir Putin as it looks to deepen its traditional ties with Moscow.
Also Read: Trump’s 50% Tariffs: These Indian States Will Take The Hardest Hit
