Editor’s Note
The U.S. has imposed significant new tariffs on a range of Indian goods, a move trade experts warn could render key exports unprofitable and threaten numerous jobs in India’s labour-intensive sectors.
The United States has imposed hefty tariffs of up to 50 percent on goods from India, effective today, Wednesday, August 27. With this US decision, exports of low-margin and labour-intensive goods such as apparel, textiles, gems & jewellery, shrimps, carpets, and furniture will become unviable, i.e., not profitable, in the American market. This move could put a large number of low-skilled jobs in India at risk.
Trade experts estimate that with the implementation of Trump’s new tariffs, the value of India’s merchandise exports to the US could fall by 40-45% in 2025-26 compared to the previous year. Think-tank Global Trade Research Initiative (GTRI) estimates that product exports to the US could drop from about $87 billion in 2024-25 to $49.6 billion this year, as two-thirds of exports by value to the US will be affected by the 50 percent tariff, pushing effective tariff rates above 60 percent in some product categories.
About 30 percent of exports to the US, valued at $27.6 billion in FY25, will not be impacted by Trump’s tariffs. This is because categories such as pharmaceuticals, electronics, and petroleum products have been exempted. Meanwhile, about 4 percent of exports, primarily auto parts, will face a 25 percent tariff rate.
Most importantly, the losses incurred across various sectors due to this tariff on India will directly benefit competitors like Vietnam, Bangladesh, Cambodia, China, and Pakistan. The Trump administration has imposed lower tariffs on these countries compared to India.
The 50 percent tariff imposed on Indian goods exported to the US includes a 25 percent duty announced by Trump in late July and an additional 25 percent duty announced in early August. This additional duty has been imposed as a “penalty” for New Delhi’s purchase of oil from Russia and defence imports from Moscow. This additional 25 percent tariff will come into effect from Wednesday, i.e., today.
Such high tariffs mean Indian goods exporters will be rendered uncompetitive in the US market, one of the handful of trade partners with which India has a net goods trade surplus. India faces heavy trade deficits with its other top trading partners in goods categories: China, Russia, and the United Arab Emirates.
Trump’s tariffs could have a widespread impact as the US accounts for 20 percent of India’s total exports and 2 percent of India’s GDP. Given the deep crisis for semi-skilled workers, the textile and gems & jewellery sectors have demanded COVID-19-like support for the industry to prevent job losses, as about 30 percent of exports from these sectors go to the US market.
Trade experts say the diamond-polishing, shrimp, and home textile sectors could face a decline in their sales volumes as these sectors are heavily dependent on US trade. The US accounts for 48 percent of shrimp exporters’ revenue, meaning the marine export sector will also see a significant volume decline.
Furthermore, both home textiles and carpets are significant export-oriented sectors. The share of exports in total sales is 70-75 percent and 65-70 percent, respectively. According to Crisil estimates, the US accounts for 60 percent of home textile exports and 50 percent of carpet exports.
In its recent report, GTRI said,
Amid fears of a crisis in the most affected sectors like apparel, textiles, gems & jewellery, shrimps, carpets, and furniture, exporters are now knocking on the government’s doors. They are demanding support as the crisis triggered by Trump’s tariffs has begun.
India’s gem and jewellery exporters are worried about their heavy dependence on the US market. They say the high 50% tariff will make Indian exports expensive and they will lose competitiveness in the market. The Gem & Jewellery Export Promotion Council (GJEPC) has warned that the impact of this decision will be felt across the entire economy,
The US is the largest market for this sector, where India exports over $10 billion annually, accounting for nearly 30% of the industry’s global trade.
Exporters have demanded that the government introduce schemes like duty drawback or refund to cover 25–50% of the new tariffs imposed from August to December 2025.
