【New Delhi, I】Trump’s India Tariffs Take Effect: Which Sectors Will Be Hit, What’s Exempt?

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Editor’s Note

This article examines the potential sectoral impact of the U.S. decision to impose a 50% tariff on select Indian goods, a move that escalates recent trade tensions and threatens billions in commerce.

US President Donald Trump and India's Prime Minister Narendra Modi talk [File: Al Drago/Reuters]
Which sectors will be worst hit?

United States President Donald Trump’s 50 percent tariff on Indian goods took effect on Wednesday. The tariff, which was first announced as a 25 percent levy on July 30 and then doubled a week later citing India’s purchase of Russian oil, is expected to impact trade worth billions of dollars and risk thousands of jobs.

The new 50 percent rate, one of the US’s highest tariffs, will apply to a range of goods from gems and jewellery, garments, footwear and furniture to industrial chemicals. The Global Trade Research Initiative (GTRI), a New Delhi-based think tank, told The Financial Times that Indian exports to the US could fall from $86.5bn this year to about $50bn in 2026 as a result.

The GTRI said that textiles, gems, jewellery, shrimp and carpets would be worst affected, with the sectors bracing for a 70 percent collapse in exports, “endangering hundreds of thousands of jobs”.

“There will be a huge impact,” MK Venu, founding editor of The Wire news site, told Al Jazeera.
“While India is not a big trading partner for the US, for India, the US is the largest trading partner,” he said, adding that exports would be affected in the areas of textiles, garments, gems and jewellery, fisheries, leather items and crafts.
These are “very, very labour-intensive” and small companies, which cannot survive the hit, Venu said about the sectors to be affected by the tariffs. “They will lose businesses to Vietnam, Bangladesh and Pakistan, and other East Asian economies.”
Will any industries be exempt?

The Indian pharmaceutical industry has been exempted from immediate tariff increases due to the significance of generic drugs in providing affordable healthcare in the US. Roughly half of the US’s generic medication imports come from India. In 2024, Indian pharmaceutical exports to the United States amounted to approximately $8.7bn.

Meanwhile, semiconductors and consumer electronics will also be covered by separate, sector-specific US tariffs. Finally, aluminium and steel products, together with passenger vehicles, will also be subject to tariffs separate from the blanket 50 percent rate.

What is the Indian government doing to mitigate the impact?

Prime Minister Narendra Modi has pledged to protect farmers, cut taxes and push for self-reliance in the wake of tariff hikes.

India “should become self-reliant – not out of desperation, but out of pride … Economic selfishness is on the rise globally and we mustn’t sit and cry about our difficulties,” Modi said in his Independence Day speech at New Delhi’s Red Fort.

Faisal Ahmed, professor of geopolitics at Fore School of Management in New Delhi, says increasing the domestic productive capacity of India is not new. “It was a policy choice taken by Modi during the COVID-19 pandemic. Trump’s tariffs look set to accelerate that process,” Ahmed told Al Jazeera.

On top of the $12bn income tax giveaway announced earlier this year, the Indian prime minister also said that businesses could expect a “massive tax bonanza” soon. It’s also understood that Delhi is planning to lower and simplify the goods and services tax.

An Indian commerce ministry official told Reuters earlier this week that exporters hit by tariffs would receive financial assistance and other giveaways to diversify into markets like Latin America and the Middle East.

Venu, who is also a former editor of the Financial Express newspaper, says that assurances have come from the central bank and the prime minister, but there is no real policy.
“Who will fund the subsidy? Will it be taxpayers or some of the big companies that benefitted from the Russian oil exports? So, there is no clarity on the details of how the subsidies would be provided. Even if subsidies are provided, it won’t be enough to cushion such a huge hit,” Venu told Al Jazeera from New Delhi.
He said that the government did not prepare for what was coming. “India should have had a policy, it should have done its homework because we knew that Trump was not going to relent, he was going to punish India for buying Russian oil.”
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⏰ Published on: August 27, 2025