US Tariffs Hit India’s Exports Hard
On August 27, 2025, the United States imposed tariffs of up to 50% on Indian exports, sending shockwaves through India’s trade ecosystem. Driven by President Donald Trump’s “America First” policy, these tariffs target India’s $87 billion export market to the US, with key sectors like textiles, gems, jewelry, and pharmaceuticals bearing the brunt. The additional 25% tariff, layered on an earlier 25% duty, is partly a response to India’s continued purchase of Russian crude oil, a geopolitical flashpoint tied to the Russia-Ukraine conflict.
Industry estimates suggest a $4–5 billion drop in exports, with textiles and engineering goods facing steep declines. The Indian rupee, already at a record low of 88.18 against the US dollar on September 3, 2025, faces further pressure, potentially increasing import costs and inflation for Indian businesses.
“India’s exports to the US, our largest single market, face a serious threat. Around 70% of our $87 billion shipments are at risk,” said Aastha Gudwani, India Chief Economist at Barclays, in an interview with Reuters.
India’s Response: Diplomacy and Diversification
India’s Commerce Ministry, led by Piyush Goyal, is actively countering the tariff shock. Meetings with exporters on September 3, 2025, focused on diversifying trade to 40 key markets, including the UK, Japan, and BRICS nations like Russia and Brazil. The proposed Export Promotion Mission, announced in the 2025-26 Union Budget, aims to bolster small and medium enterprises (MSMEs) in textiles and chemicals, which are particularly vulnerable.
India is also pushing for a bilateral trade agreement (BTA) with the US, targeting a first phase by November 2025. However, negotiations have stalled over US demands for greater access to India’s agriculture and dairy markets, which Prime Minister Narendra Modi has vowed to protect.
Key Sectors Under Pressure
The tariffs disproportionately affect labor-intensive industries, threatening jobs and economic growth. Here’s a breakdown of the most impacted sectors:
- Textiles and Apparel: With $10.3 billion in US exports, textiles face a 30% cost disadvantage compared to competitors like Bangladesh and Vietnam, risking a 70% drop in export volumes.
- Gems and Jewelry: Representing $10 billion in exports, this sector employs millions in Surat and Mumbai. Tariffs could lead to 175,000 job losses, per industry estimates.
- Pharmaceuticals: India’s $7 billion pharma exports to the US, including generic drugs, face rising costs, potentially increasing medicine prices domestically and abroad.
- Engineering Goods: Contributing $18 billion to US exports, this sector could see a 20% revenue hit, impacting manufacturers in states like Gujarat and Maharashtra.
Opportunities Amid Challenges
Despite the tariff headwinds, India’s response signals resilience. The push for trade diversification aligns with India’s 7.8% GDP growth in Q1 2025, showcasing economic strength. Strengthening ties with BRICS nations and increasing pharmaceutical exports to Russia, the Netherlands, and Brazil could offset US market losses. Additionally, the GST Council’s ongoing discussions on September 3, 2025, to reduce taxes on key goods may ease domestic cost pressures for exporters.
“We are exploring every avenue to protect our exporters, from new markets to trade agreements,” Commerce Minister Piyush Goyal stated during a press briefing in New Delhi today.
What’s Next for Indian Exporters?
For Indian businesses, the immediate focus is on market diversification and cost management. Exporters are urged to explore FTAs with countries like the UK and UAE, while MSMEs can leverage government schemes like the Export Promotion Mission. Investors should monitor export-heavy stocks like TCS, Sun Pharma, and Arvind Textiles for volatility, while keeping an eye on rupee movements for forex impacts.
Policymakers face a delicate balancing act: protecting domestic industries while navigating US trade demands. The outcome of BTA talks by November will be critical, as will India’s ability to maintain its growth trajectory amid global trade turbulence.
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