United States President Donald Trump’s 50 p.c tariff on Indian items, which is predicted to impression commerce price billions of {dollars} and danger 1000’s of jobs on this planet’s most populous nation, took impact on Wednesday.
The US first slapped a 25 percent tariff on India on July 30 and per week later imposed an additional 25 percent, citing New Delhi’s buy of Russian oil.
The new 50 p.c fee, one of many US’s highest tariffs, will now apply to a spread of products from gems and jewelry, clothes, footwear and furnishings to industrial chemical compounds.
The crushing tariff fee will put India at a drawback in export competitiveness in opposition to China, and can undermine the financial ambitions of Prime Minister Narendra Modi to remodel the nation into a significant manufacturing hub. Till lately, the US was India’s largest trading partner with annual bilateral commerce price $212bn.
So which industries can be hit the toughest and the way will it have an effect on US-India relations?
Which sectors can be worst hit?
The International Commerce Analysis Initiative (GTRI), a New Delhi-based assume tank, instructed The Monetary Occasions newspaper that Indian exports to the US might fall from $86.5bn this 12 months to about $50bn in 2026 on account of at present’s announcement.
The GTRI mentioned that textiles, gems, jewelry, shrimp and carpets could be worst affected, with the sectors bracing for a 70 p.c collapse in exports, “endangering tons of of 1000’s of jobs”.
“There can be a big impact,” MK Venu, founding editor of The Wire information website, instructed Al Jazeera.
“Whereas India just isn’t a giant buying and selling associate for the US, for India, the US is the biggest buying and selling associate,” he mentioned, including that exports could be affected within the areas of textiles, clothes, gems and jewelry, fisheries, leather-based gadgets and crafts.
These are “very, very labour-intensive” and small corporations, which can’t survive the hit, Venu mentioned concerning the sectors to be affected by the tariffs. “They’ll lose companies to Vietnam, Bangladesh and Pakistan, and different East Asian economies.”
Will any industries be exempt?
The Indian pharmaceutical business has been exempted from quick tariff will increase because of the significance of generic medicine in offering reasonably priced healthcare within the US. Roughly half of the US’s generic remedy imports come from India.
In 2024, Indian pharmaceutical exports to the US amounted to roughly $8.7bn.
In the meantime, semiconductors and client electronics may also be coated by separate, sector-specific US tariffs. Lastly, aluminium and metal merchandise, along with passenger automobiles, may also be topic to tariffs separate from the blanket 50 p.c fee.
What’s the Indian authorities doing to mitigate the impression?
Prime Minister Modi has pledged to guard farmers, reduce taxes and push for self-reliance within the wake of tariff hikes.
India “ought to develop into self-reliant – not out of desperation, however out of satisfaction … Financial selfishness is on the rise globally and we mustn’t sit and cry about our difficulties,” Modi mentioned in his Independence Day speech at New Delhi’s Crimson Fort.
Faisal Ahmed, professor of geopolitics at Fore Faculty of Administration in New Delhi, says growing the home productive capability of India just isn’t new. “It was a coverage alternative taken by Modi in the course of the COVID-19 pandemic. Trump’s tariffs look set to speed up that course of,” Ahmed instructed Al Jazeera.
On high of the $12bn revenue tax giveaway introduced earlier this 12 months, the Indian prime minister additionally mentioned that companies might anticipate a “huge tax bonanza” quickly. It’s additionally understood that Delhi is planning to decrease and simplify the products and providers tax.
This, together with a lift to the salaries of almost 5 million state staff and 6.8 million pensioners (which is able to kick in subsequent 12 months), might assist India’s economic system retain some development momentum.
An Indian commerce ministry official instructed Reuters earlier this week that exporters hit by tariffs would obtain monetary help and different giveaways to diversify into markets like Latin America and the Center East.
Venu, who can also be a former editor of the Monetary Categorical newspaper, says that assurances have come from the central financial institution and the prime minister, however there is no such thing as a actual coverage.
“Who will fund the subsidy? Will or not it’s taxpayers or a number of the large corporations that benefitted from the Russian oil exports? So, there is no such thing as a readability on the main points of how the subsidies could be offered. Even when subsidies are offered, it gained’t be sufficient to cushion such an enormous hit,” Venu instructed Al Jazeera from New Delhi.
He mentioned that the federal government didn’t put together for what was coming. “India ought to have had a coverage, it ought to have accomplished its homework as a result of we knew that Trump was not going to relent, he was going to punish India for purchasing Russian oil.”
Ahmed from the Fore Faculty of Administration mentioned that the tariffs “shouldn’t have a big impression on India’s GDP… most likely round 1 p.c”.
Teresa John, lead economist at Nirmal Financial institution, echoed Ahmed: “We estimate a [negative] impression of about $36bn, or 0.9 p.c of GDP,” she instructed Reuters.
Earlier this 12 months, the Worldwide Financial Fund forecast that India’s economic system would develop by 6.4 p.c in 2026. That might change.
What motive has Trump given for tariffs?
Talks to defuse a commerce conflict broke down after 5 rounds of negotiations, following Trump’s requires India to halt its imports of Russian oil and fuel.
Regardless of the persistent menace of upper US tariffs, India has continued to purchase Russian crude this 12 months – albeit at falling ranges.
New Delhi has additionally been hit due to the geopolitical rivalry between Russia and the West. High Trump officers, together with US Treasury Secretary Scott Bessent, have accused India of funding Russia’s conflict in opposition to Ukraine. He identified that India’s Russian oil imports went from 1 p.c earlier than the Ukraine conflict to 37 p.c. He accused India of “profiteering”.
India’s overseas ministry mentioned that New Delhi would “take all vital steps to guard its nationwide pursuits” and identified that Russian oil imports have been pushed by market forces and the power wants of the nation’s 1.4 billion individuals.
New Delhi has additionally accused Washington of selectively focusing on India for buying Russian oil, when each the European Union and China – with whom Trump has brokered commerce offers – proceed to import power from Russia.
Trump, who has unleashed a tariff conflict that has shaken the worldwide economic system, has been highlighting the excessive tariffs imposed by India.
“India has been, to us, simply concerning the highest-tariffed nation wherever on this planet. It’s very laborious to promote to India as a result of they’ve commerce boundaries and really robust tariffs,” Trump mentioned throughout Prime Minister Modi’s go to to the US in February.
New Delhi pledged to take away levies on sure industrial items from the US and to extend defence and gasoline purchases – to assuage Trump’s grievances over commerce imbalances. But it surely refused to open its huge farming and dairy sector to low cost US imports.
“Modi will stand like a wall in opposition to any coverage that threatens their pursuits. India won’t ever compromise on the subject of defending the pursuits of our farmers,” the Indian prime minister mentioned on August 15.
For context, the easy common tariff fee that India imposed on agricultural imports was 39 p.c on the finish of 2024. Against this, the easy common tariff fee that the US charged on its agricultural imports was 4 p.c. Trump took umbrage with that.
Final 12 months, bilateral trade between India and the US stood at roughly $212bn, with a commerce hole of about $46bn in India’s favour.
Trump’s robust stance has pushed India to fix ties with rival China – the world’s second-largest economic system and considered one of New Delhi’s greatest buying and selling companions with a bilateral commerce of round $136bn. India can also be making ready to roll out the crimson carpet to Russian President Vladimir Putin as New Delhi strikes to strengthen its conventional ties with Moscow.
“Most strategic consultants in India have already mentioned that the belief between India and the US is at an all-time low. So there may be an evaluation that India will rebalance in direction of Russia, in direction of China and in direction of BRICS,” Venu, the veteran Indian journalist, mentioned.
