In a significant move, Donald Trump has imposed a 50% tariff on the majority of U.S. imports from India, fulfilling a previous threat aimed at penalizing the nation for its acquisition of discounted Russian oil. The tariffs took effect just after midnight on Wednesday in Washington, raising concerns about the potential impact on India’s economy and the disruption of global supply chains.
This new measure follows the implementation of a 25% tariff on Indian goods earlier this month. Trump has openly criticized India for its dealings with Russian oil, arguing that such purchases indirectly support Russia’s military efforts in Ukraine. Since returning to office in January, Trump has intensified tariff rates on goods from various countries, straining international relations and provoking fears of rising inflation.
As a result of this latest development, Indian exporters will contend with some of the highest tariffs placed on foreign goods by the Trump administration. Brazil is also facing similar tariffs on its exports to the U.S.
Indian officials assert that their country has been unfairly targeted in its trade relationships, warning that it may strengthen ties with Russia and China as a backlash against the U.S. Nearly all Indian exports to the U.S. — valued at $87.3 billion last year, according to the U.S. Trade Representative — will now be subject to elevated tariffs, though certain key items, like smartphones, are currently exempt.
The action, detailed in a notice from the U.S. Homeland Security Department earlier this week, has led some economists to predict a drastic decline in trade between India and the United States. “I don’t care what India does with Russia,” Trump stated on his social media platform, Truth Social, last month. “They can take their dead economies down together, for all I care.”
In response, the Indian government has taken a defiant stance, with Prime Minister Narendra Modi encouraging citizens to support domestic products. He stated, “All of us should follow the mantra of buying only ‘Made in India’ goods,” while acknowledging the potential challenges imposed by the tariffs. “Pressure on us may increase, but we will bear it,” he added.
Goldman Sachs’ chief economist for India, Santanu Sengupta, cautioned that sustained 50% tariffs could reduce GDP growth to below 6%, down from a projected 6.5%. Competing exporters from countries such as Turkey and Thailand stand to benefit with lower tariffs and are likely to appeal to American buyers with more affordable alternatives.
Currently, approximately 30% of India’s exports to the U.S. — encompassing pharmaceuticals, electronics, raw drug materials, and refined fuels, totaling $27.6 billion — remain duty-free. However, sectors like textiles, gems, jewelry, and seafood, which have historically depended on the American market, are likely to see decreased orders. Sengupta remarked, “At a 50% tariff, it is very difficult to export.”
The adverse effects are already becoming apparent, as the Federation of Indian Export Organisations (FIEO) reported that manufacturers in textile hubs such as Tirupur, Delhi, and Surat have paused production due to diminished cost competitiveness. FIEO President SC Ralhan noted, “Indian goods have been rendered uncompetitive compared to competitors from China, Vietnam, Cambodia, the Philippines, and other south-east and south Asian countries.”
The Indian stock market reacted negatively to the impending tariffs, with the benchmark BSE Sensex experiencing a 1% drop — a decline of 849 points to 80,876 in Mumbai on Tuesday. The U.S. is India’s largest export market, representing nearly one-third of shipments in crucial sectors like gems, jewelry, and textiles, which underscores the economic implications of the tariff increase.
Even if tensions regarding the tariffs diminish, the trust that had been gradually built between the U.S. and India appears to have suffered serious damage. A senior Indian trade official, who wished to remain anonymous, stated, “Trump has blown it. The hard work between the two countries, which inherently did not trust each other but still managed to build a solid strategic relationship, is now at risk. It is going to take a long time to reboot, and it probably won’t happen until Trump is out.”
The official added, “At a working level, the countries must cooperate, but politically, neither can afford to appear weak.”
Indian External Affairs Minister S. Jaishankar condemned Washington’s request for New Delhi to halt Russian crude purchases as “unjustified and unreasonable,” accusing Western nations of hypocrisy, given that Europe conducts significantly more trade with Russia. To avoid the penalty of increased U.S. tariffs, India would need to replace around 42% of its oil imports.
Trump’s accusations that India is indirectly funding Russia’s war effort through oil purchases have not been mirrored in his stance towards China, another major oil purchaser. Trump has also sought to ease tensions with Moscow, inviting Russian President Vladimir Putin to an Alaskan summit and suggesting a trilateral meeting with Ukrainian President Volodymyr Zelenskyy to discuss the war’s resolution.
Despite the rising tensions, Jaishankar expressed optimism regarding ongoing U.S.-India trade discussions, stating, “We are two big countries; we need to have conversations … the lines are not cut.”
Previous hopes for a trade agreement that would cap tariffs at 15% were dashed when India opted not to open its agricultural market to U.S. farm goods, fearing adverse effects on its small farmers. India has recalibrated its relationship with Russia, which it characterizes as an “all-weather friend.” Jaishankar’s recent visit to Moscow coincides with expectations for Putin to travel to New Delhi later this year. Additionally, Modi plans to visit China for the first time in seven years to attend the Shanghai Cooperation Organisation summit, aiming to stabilize relations after a severe border clash in 2020 soured ties.
One senior Indian official, who asked to remain anonymous, noted, “India will tiptoe toward China, but not in a full embrace. There is a trust factor from the past with China, and much history to reconcile, but the reality is that India must do business with China.”
Veteran South Asia analyst Michael Kugelman remarked, “The current [Trump] administration may set a record for the highest number of own goals with a top bilateral partner over such a short period of time.”
