India’s bustling export sector is facing its toughest test in years, as the United States’ newly imposed 50% tariff on Indian goods takes effect. The move, announced by President Donald Trump and justified by White House advisor Peter Navarro as retaliation for India’s continued purchases of Russian oil, has sent shockwaves through India’s economy, threatening $48.2 billion worth of exports and upending trade relations between the two nations.
The tariff, which doubled from the initial 25% announced earlier this year, is one of the steepest ever levied against a major U.S. trading partner. According to the Associated Press, the Indian government estimates the new duties could make shipments to the U.S.—India’s largest export market—commercially unviable for many sectors, triggering job losses and a broader economic slowdown. Labor-intensive industries such as textiles, gems and jewelry, leather goods, food, and automobiles are expected to bear the brunt, as highlighted by the Global Trade Research Initiative.
“The new tariff regime is a strategic shock that threatens to wipe out India’s long-established presence in the U.S., causing unemployment in export-driven hubs and weakening its role in the industrial value chain,” Ajay Srivastava, the think tank’s founder and a former Indian trade official, told the Associated Press. While some sectors such as pharmaceuticals and electronic goods have been spared, the overall impact is expected to be severe.
On the ground, the reaction from Indian exporters has been swift and anxious. Puran Dawar, a leather footwear exporter from Agra, described the move as “an absolute shock,” warning that the industry would take a substantial hit unless domestic demand strengthens or new overseas markets are found. Dawar’s sentiment is echoed by Ajay Sahai, director general of the Federation of Indian Export Organizations, who noted, “It’s a tricky situation. Some product lines will simply become unviable overnight.”
The shockwaves have not been limited to exporters alone. Indian equity markets tumbled in response to the announcement, with the Nifty50 closing at 24,500 (down 211 points) and the Sensex dropping 706 points to 80,080, according to Reuters. Analysts warn that sectors tied to exports—especially textiles, gems and jewelry, leather, and machinery—will remain under pressure as markets adjust to the new reality.
The U.S. justification for the tariffs has centered on India’s growing imports of Russian oil, which Washington argues are helping to fund Russia’s war on Ukraine. “Indian refiners, working with ‘silent Russian partners,’ were making huge profits by refining Russian oil and selling it in international markets while ‘Russia pockets hard currency to fund its war on Ukraine,’” Navarro said, as reported by Indian media. Despite U.S. pressure, India plans to raise Russian oil imports by 10–20% in September, with officials insisting that discounted crude from Moscow remains vital for meeting domestic demand.
Minister of State for External Affairs Kirti Vardhan Singh called the U.S. tariffs “wrong and unjustified,” arguing that the reasons and allegations made against India are “entirely wrong.” He added, “There are many countries that import oil from countries that America objects to. But did America implement such tariffs on those countries?” Singh also assured the public that the government is doing its best to ensure the impact does not affect Indian citizens.
Finance Minister Nirmala Sitharaman has moved quickly to reassure exporters, promising “comprehensive support” and urging industry leaders to protect workers’ livelihoods. After an inter-ministerial meeting, she emphasized the government’s commitment to “addressing all concerns of the exporting community and exploring every possible avenue to safeguard their interests,” according to a statement from the Federation of Indian Export Organizations. The government is reportedly considering financial incentives such as favorable bank loan rates for exporters, moratoriums on export loans, and the extension of export realization periods to ease cash flow challenges.
Other measures are also in the works. The government has extended the import duty exemption on cotton until December 31, 2025, a move aimed at supporting the textile and apparel industry, which employs over 45 million people. The textile ministry stressed that “affordable, high-quality cotton strengthens India’s position in export markets, reviving orders for small and medium enterprises as well as export-oriented units.”
Meanwhile, the Andhra Pradesh Chambers of Commerce and Industry Federation has called for urgent policy and financial interventions to protect the shrimp sector, which supports 2.8 crore people and faces a major blow from the new tariffs. The U.S. alone accounts for 25% of India’s $7.3 billion seafood exports, according to the chamber’s president, P Bhaskar Rao.
The Reserve Bank of India’s August bulletin acknowledged the downside risk to overall demand in the Indian economy due to tariff uncertainties, but pointed to benign near-term inflation and favorable agricultural conditions as positives. RBI governor Sanjay Malhotra assured that the central bank has measures in place to protect the economy, including initiatives to promote local currency trading and consultations with industry representatives to evaluate the effects of the tariffs.
Prime Minister Narendra Modi, speaking at a rally in Gujarat, vowed to stand firm in protecting the interests of farmers, small businesses, and the dairy sector. “For me, the interests of farmers, small businesses and dairy are topmost. My government will ensure they aren’t impacted,” Modi said, as reported by the Associated Press. He accused the U.S. of engaging in a “politics of economic selfishness.”
Industry voices have echoed the need for resilience and adaptation. Maruti Suzuki India Chairman R C Bhargava called on the nation to “stand united” against what he described as bullying, while CII president Rajiv Memani urged Indian businesses to turn challenges into opportunities by diversifying trade and investing in quality and technology. “Indian industry must now invest in quality, branding and technology to make our products and services indispensable worldwide,” Memani told the media.
India is not standing still. The Trade Ministry has launched a 40-country outreach plan to boost textile exports, targeting markets in the UK, Japan, South Korea, Germany, France, and Australia, among others. Trade negotiations with the European Union have gained renewed urgency, as officials look to reduce dependence on the U.S. market. At the same time, proposed reforms to the Goods and Services Tax (GST) aim to lower tax rates on consumer durables and boost local consumption, potentially offsetting some of the tariff’s impact.
Despite the immediate disruptions, some officials remain optimistic. The commerce ministry has said the tariffs will have a short-term impact but “will not be a very long-term loss,” emphasizing the need to create resilient supply chains and diversify exports. The government is hopeful of resuming trade talks with the U.S. soon, though both sides remain entrenched on key issues—especially market access for American agricultural and dairy products, which New Delhi has resisted in order to protect millions of Indian jobs.
For now, the stakes couldn’t be higher. As India’s exporters scramble to adapt and the government rolls out support measures, the coming months will test the resilience of one of the world’s fastest-growing economies—and the future of its relationship with a key global partner.
