India’s stock market has been hit hard in recent weeks, shaken by a dramatic escalation in trade tensions with the United States. On August 16, 2025, President Donald Trump’s administration announced a second round of tariffs on Indian goods, effectively doubling the levy to a steep 50%. For many in New Delhi and beyond, the move felt both sudden and severe—especially given India’s relatively modest trade surplus with the US and its longstanding status as a strategic partner. But as the dust settles, a range of voices from global economists to India’s own leadership are weighing in, offering both warnings and unexpected notes of optimism.
According to Jefferies’ global head of equity strategy, Christopher Wood, investors shouldn’t be too quick to panic. In his widely followed Greed & Fear note, Wood described the tariffs as less a reason to flee Indian equities and more an opportunity to buy in. “It pays to stand up to the Trump,” Wood argued, pointing to previous episodes where the US President’s hardline stances eventually softened. Wood also highlighted the curious nature of the tariffs’ timing and justification. While India has indeed been importing discounted Russian crude since the Ukraine war, he noted that China has been buying far more without facing similar penalties. As Wood put it, “The singling out of India in this fashion is not what most people would have predicted.”
The immediate impact on India’s markets, however, has been undeniable. Stocks have fallen into a tailspin, with three consecutive weeks of losses recorded by mid-August. Over the past year, Indian equities have suffered their worst underperformance against global peers in fifteen years. Analysts point to not just the tariffs, but also to expensive valuations and a glut of new equity issuances as factors behind the slide. Still, there may be a silver lining: with prices cooling off, the risk of further downside appears limited. Indian stocks, which trade at a premium of about 63% over other emerging-market peers, are now back in line with their ten-year average—a sign that the market may be stabilizing, at least for now.
Yet the tariffs’ implications go far beyond the trading floor. The new US measures are expected to hit key Indian sectors like textiles, gems, and footwear especially hard, putting fresh pressure on businesses already grappling with tight margins and complex supply chains. According to reporting from NDTV, American economist Jeffrey Sachs criticized the US approach, arguing that Washington has “no right” to tell India who it can or cannot trade with. “The US does not act responsibly towards other countries ... sovereign states should have, and do have, the right to choose their own trade partners,” Sachs said in a televised interview. He warned that the tariff increase is a clear signal for India to tread carefully in its dealings with Washington.
Sachs went further, advising India to rethink its reliance on the US market. Instead, he suggested, India should cultivate a diversified network of trade partners, including Russia, China, ASEAN countries, and African economies. “India needs a diversified base of partners – Russia, China, ASEAN countries, Africa, and not see itself as mainly focusing on the US market, which is going to be unstable, slow-growing and basically protectionist,” he said. Sachs’s remarks echo growing concerns among Indian business leaders and policymakers about the dangers of over-dependence on a single, increasingly unpredictable trading partner.
India’s political leadership has responded with a mix of defiance and pragmatism. During the country’s 79th Independence Day celebrations on August 15, Prime Minister Narendra Modi addressed the nation from Delhi’s Red Fort, delivering a speech that doubled as both a rallying cry and a strategic roadmap. Without naming the US directly, Modi called for a renewed push toward economic self-reliance and, crucially, energy independence. “We know that we remain dependent on many countries to meet our energy needs,” he acknowledged. “But to build a truly self-reliant India, we must achieve energy independence.”
Modi was especially emphatic in his support for India’s farmers, many of whom could be among the hardest hit by the new tariffs. Framing the issue as a matter of national sovereignty, he pledged to “stand like a wall” against any measures that threaten the livelihoods of Indian agricultural workers. In a bid to soften the blow of rising costs and uncertainty, Modi announced a reduction in the goods and services tax starting in October 2025—a move aimed at boosting domestic consumption just ahead of the busy festive season. He also outlined ambitious plans to expand India’s domestic capacity in vital sectors like fertilizers, semiconductors, jet engines, and electric vehicle batteries, explicitly linking industrial self-sufficiency to national security and long-term competitiveness.
“When economic selfishness is rising day by day... we must not just sit and worry about the crisis but instead focus on our strengths,” Modi told the nation, striking a note of resilience that resonated with many listeners. The Prime Minister’s remarks were widely interpreted as both a challenge to Washington’s trade tactics and a call to Indian industry to seize the moment as an opportunity for growth and innovation.
Back in the financial world, global investors are watching the situation closely. July’s inflation numbers in the US came in slightly better than expected, raising hopes that the Federal Reserve might cut interest rates as soon as September. Christopher Wood of Jefferies believes the US dollar is likely to remain in a downtrend, though he cautions that Federal Reserve chair Jerome Powell’s famously cautious, data-driven approach could delay any decisive action. Wood also suggested that President Trump’s criticism of Powell has more to do with reducing the government’s debt-servicing burden than with genuine economic fundamentals.
Meanwhile, the broader geopolitical context is shifting. The US tariffs, many observers note, have had the unintended effect of strengthening ties among the BRICS nations—Brazil, Russia, India, China, and South Africa. As Wood pointed out, “the move has ironically driven the BRICS grouping... closer together.” For India, this could mean fresh opportunities to deepen economic and strategic relationships outside the Western orbit, even as it navigates the immediate turbulence in its stock markets and export sectors.
For now, the consensus among experts seems to be that India’s current woes are as much about global uncertainty as they are about domestic fundamentals. The coming weeks will test both the resilience of Indian markets and the diplomatic skill of its leaders. But as the country’s policymakers, business leaders, and international partners all scramble to adjust, one thing is clear: the world is watching, and the stakes could hardly be higher.