U.S. President Donald Trump signed an executive order imposing an additional 25% tariff on Indian goods, raising the total tariff to 50% for many products, effective August 28, 2025. This follows an initial 25% tariff implemented on August 7, 2025, as a penalty for India’s continued purchase of Russian oil, which the U.S. claims fuels Russia’s war in Ukraine. Indian exporters have called the 50% levy a “severe setback,” warning that it threatens the viability of businesses, particularly in sectors like textiles, gems and jewellery, and seafood. The move has strained U.S.-India trade relations, with India’s Foreign Ministry condemning the tariffs as “unfair, unjustified, and unreasonable.” This article examines the implications of the tariffs, India’s response, and the broader economic and geopolitical context.
Background and Rationale for Tariffs
The tariffs stem from President Trump’s frustration with India’s trade policies and its continued importation of Russian oil, which accounts for over 35% of India’s oil supplies, making it the second-largest buyer of Russian crude after China. The U.S. argues that these imports undermine efforts to curb Russia’s revenue amid the Ukraine conflict. Trump’s executive order, signed on August 6, 2025, cites India’s oil purchases as a direct or indirect support for Russia, justifying the additional 25% tariff. This follows an earlier 25% tariff announced on July 31, 2025, which was part of a broader “reciprocal” tariff regime targeting 69 trading partners, with rates ranging from 10% to 41%.
Trump has also criticized India’s high tariffs on U.S. goods, averaging 39% on agricultural products and up to 50% on certain items like apples and corn, calling India a “tariff abuser” and “not a good trading partner.” He has linked India’s trade barriers and Russian oil purchases to broader U.S. goals of reducing trade deficits and boosting domestic manufacturing. The White House has indicated that further tariffs, including a potential 100% levy on semiconductors, could be imposed, though pharmaceuticals and electronics are currently exempt.
Economic Impact on India
The 50% tariff is expected to affect 55% of India’s $86.5 billion in exports to the U.S. in 2024, impacting key sectors such as textiles, gems and jewellery, seafood, auto parts, and chemicals. Analysts estimate a potential 40–50% drop in U.S.-bound exports, which could shave India’s GDP growth to around 6% in 2025–26, down from the Reserve Bank of India’s 6.5% forecast. The United States is India’s largest trading partner, with bilateral trade reaching $131.8 billion in 2024–25, including $86.5 billion in exports.
Affected Sectors
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Textiles and Apparel: The 50% tariff, combined with existing trade remedy measures, places Indian exporters at a 30–35% competitive disadvantage compared to rivals like Vietnam (20% tariff), Bangladesh (35%), and Cambodia (19%). Textile exporters have warned of order cancellations and reduced viability for small and medium enterprises (SMEs) with thin profit margins.
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Gems and Jewellery: This sector, contributing 7% to India’s GDP and employing 5 million workers, exported $10 billion to the U.S. in 2024–25. The tariff hike is described as “devastating,” with potential job losses in the thousands.
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Seafood: Indian shrimp exports face a total levy of 58.26% from August 28, 2025, including anti-dumping and countervailing duties, imperiling a $3 billion industry.
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Engineering and Steel: Steel exports already face 50% sectoral tariffs, and the new levies threaten other engineering goods, which account for 17.07% of India’s engineering exports.
Exemptions and Vulnerabilities
Pharmaceuticals, electronics (including iPhones), and semiconductors are currently exempt from the reciprocal tariffs, providing temporary relief for companies like Apple, which has significant manufacturing operations in India. However, Trump has signaled potential tariffs on pharmaceuticals, starting with a “small tariff” that could escalate to 250% in the future, threatening India’s $10.5 billion pharma exports to the U.S. Only 20% of India’s total goods exports (2% of GDP) are U.S.-bound, but the disproportionate impact on labor-intensive sectors could exacerbate unemployment and economic slowdown.
Market Reactions
Indian stock markets opened marginally lower on August 7, 2025, with the Nifty 50 index falling 0.31% to 24,685.15 and the BSE Sensex dropping 0.28% to 80,970.31. The rupee weakened in offshore markets, and foreign institutional investor (FII) outflows reached ₹6,000 crore in the week prior, reflecting market volatility. Analysts warn of a “near-term knee-jerk reaction” unless trade negotiations yield clarity.
India’s Response
India’s Foreign Ministry has condemned the tariffs as “unfair, unjustified, and unreasonable,” noting that the U.S. had previously encouraged India to import Russian oil to stabilize global energy markets after traditional supplies were diverted to Europe following the Ukraine conflict. Prime Minister Narendra Modi emphasized India’s commitment to protecting its farmers, stating, “India will never compromise on the interests of its farmers,” and expressed willingness to “pay a great personal price” to defend national interests.
Opposition leaders have been vocal:
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Rahul Gandhi (Congress) called the tariffs “economic blackmail” and an attempt to bully India into an unfair trade deal.
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Shashi Tharoor (Congress) warned that the 50% tariff would make Indian goods unaffordable in the U.S., urging diversification to markets like the EU, Latin America, and Africa.
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Mallikarjun Kharge (Congress) asserted that penalizing India for its non-aligned policy “does not understand the steel frame India is made of.”
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Mayawati (BSP) labeled the tariffs a “betrayal” of a friendly nation.
The Federation of Indian Export Organisations (FIEO), led by S.C. Ralhan, described the tariffs as “extremely shocking,” noting that 55% of U.S.-bound exports are affected, with many orders already on hold. The Global Trade Research Initiative (GTRI) recommended a six-month moratorium on retaliation to focus on negotiations, suggesting that India could phase out Russian oil imports only if economically viable.
Strategic and Geopolitical Context
The tariffs mark a low point in U.S.-India relations, a shift from the “special bond” Trump claimed with Modi during their February 2025 meeting. Trump’s rhetoric, including calling India’s economy “dead” and accusing it of fueling Russia’s war machine, has heightened tensions. The U.S. has imposed lower tariffs on other partners, such as Vietnam (20%), Japan (15%), and the EU (15%), placing India at a competitive disadvantage.
India faces a strategic dilemma:
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Russian Oil Imports: India’s reliance on discounted Russian oil has saved billions, but the U.S. views it as undermining sanctions against Russia. A senior Indian official suggested a phased reduction in Russian oil imports as part of a compromise, but only if economically feasible.
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Trade Negotiations: U.S.-India trade talks, ongoing since February 2025, have stalled over India’s reluctance to open its agriculture and dairy markets. A U.S. delegation is expected in New Delhi on August 25, 2025, to negotiate the first phase of a Bilateral Trade Agreement (BTA) by autumn.
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BRICS Response: Brazilian President Luiz Inacio Lula da Silva proposed a BRICS-level discussion involving India, China, Russia, and South Africa to address the tariffs, signaling potential multilateral pushback.
Economic and Policy Options
India is exploring several responses to mitigate the impact:
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Diversification: Accelerating trade with the EU, ASEAN, Latin America, and Africa, leveraging agreements like the India-EFTA trade pact.
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Domestic Support: The government is considering fiscal relief for exporters, including interest subsidies and loan guarantees.
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Market Reorientation: Encouraging domestic consumption of affected goods like textiles and leather, and exploring alternative markets like Myanmar and Nepal.
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Negotiation Strategy: Prioritizing a fair trade deal with the U.S. while maintaining strategic autonomy, as advocated by trade experts like Ajay Srivastava of GTRI.
Analysts suggest that the tariffs could inadvertently spur India’s Atmanirbharta (self-reliance) initiatives by incentivizing domestic manufacturing and reducing reliance on the U.S. market. However, a sharp drop in exports could strain SMEs and labor-intensive sectors, necessitating robust government intervention.
Broader Implications
The 50% tariff threatens India’s ambition to expand bilateral trade with the U.S. to $500 billion by 2030, from $191 billion in 2024. It also undermines India’s position as an emerging manufacturing hub, as competitors like Vietnam and Bangladesh gain an edge due to lower tariffs. The tariffs could disrupt global supply chains, particularly for textiles and jewellery, and increase prices for U.S. consumers, potentially fueling inflation.
Geopolitically, the tariffs challenge India’s non-aligned stance and strategic autonomy, forcing a delicate balancing act between maintaining ties with Russia and negotiating with the U.S. The BRICS initiative proposed by Brazil could strengthen India’s position in multilateral forums, but immediate economic pressures demand swift action.
President Trump’s imposition of a 50% tariff on Indian exports, effective August 28, 2025, represents a significant escalation in U.S.-India trade tensions, driven by India’s Russian oil purchases. Affecting 55% of India’s $86.5 billion U.S. exports, the tariffs threaten sectors like textiles, gems and jewellery, and seafood, potentially reducing GDP growth and straining SMEs. India’s response—condemning the tariffs, exploring diversification, and pursuing trade talks—reflects a commitment to strategic autonomy and economic resilience. While exemptions for pharmaceuticals and electronics provide some relief, the long-term impact hinges on India’s ability to negotiate a fair trade deal and pivot to alternative markets. As global trade dynamics shift, the tariffs underscore the need for India to accelerate Atmanirbharta and strengthen multilateral partnerships to navigate an increasingly protectionist world.
