India-US tariffs have soared amid geopolitical tensions and trade frictions, with the US imposing some of the toughest duties ever on Indian exports, straining diplomatic and economic ties between the two nations.
Background
In August 2025, the US administration under President Donald Trump doubled tariffs on Indian imports to as high as 50%, citing India’s continued purchase of Russian oil and longstanding disputes over market access and non-tariff barriers. The new tariffs layer an additional 25% penalty over previous duties, affecting key sectors such as textiles, jewelry, footwear, furniture, and chemicals. Indo-US trade had reached annual volumes of over $212 billion, positioning the US as India’s largest trading partner until the imposition of these punitive measures.
Key Takeaways
- 50% tariffs impact nearly two-thirds of Indian goods to the US, with the greatest effects on labor-intensive sectors such as textiles, gems, and footwear.
- Indian exports to the US, worth about $87 billion annually, could fall sharply by 2026, with estimates suggesting a plunge to $50 billion.
- Exporters in Gujarat and small and medium enterprises (MSMEs) are particularly vulnerable.
- Exemptions exist for some goods, including pharmaceuticals and select electronics, but the majority of merchandise faces higher costs.
Implications
- The tariffs threaten hundreds of thousands of jobs in India and will likely weaken GDP growth by up to 0.5%, especially in export-driven states.
- India’s competitiveness as a manufacturing hub is at risk vis-à-vis rivals like China, Vietnam, and Bangladesh, who may capture lost market share.
- The abrupt U-turn in US-India trade relations marks a setback for broader strategic cooperation, as diplomatic talks have stalled after multiple unsuccessful rounds.
What’s Next?
Negotiations are expected to continue, but neither government has indicated an imminent resolution. India is seeking to shield vulnerable sectors through policy support and will leverage the “Make in India” initiative to boost domestic consumption. Meanwhile, global competitors stand ready to benefit, and India faces the urgent task of rebalancing its export strategy and trade partnerships.