NEW DELHI (AP) — India is preparing for a significant hit to its overseas trade as steep tariffs imposed by the United States come into effect on a variety of Indian products. This move threatens over half of India’s exports to its largest market and underscores the fragile trade relationship between the two nations.
Initially, President Donald Trump announced a 25% tariff on Indian goods. However, earlier this month, he signed an executive order initiating an additional 25% tariff due to India’s purchases of Russian oil, raising the total tariffs to a staggering 50% on products coming from India, its ally.
The Indian government estimates that these tariffs will impact approximately $48.2 billion worth of exports. Officials have expressed concerns that the new duties might make shipments to the U.S. commercially unviable, which could lead to job losses and a slowdown in economic growth. Although India-U.S. trade relations have grown in recent years, they still face challenges due to disputes over market access and domestic political pressures.
According to estimates from New Delhi-based think tank, Global Trade Research Initiative, labor-intensive sectors such as textiles, gems and jewelry, leather goods, food, and automobiles are expected to experience the most significant repercussions from these tariffs. Ajay Srivastava, the founder of the think tank and a former Indian trade official, noted that this new tariff regime poses a strategic shock that threatens India’s well-established presence in the U.S. market. He emphasized that many workers in export-driven sectors would face unemployment, thus impacting India’s position in the global industrial value chain.
While the United States has exempted certain sectors, including pharmaceuticals and electronic goods, from additional tariffs, providing some relief, exporters remain worried about the potential losses. Puran Dawar, a leather footwear exporter based in Agra, expressed that the industry would suffer considerable losses in the near term without a strengthening in domestic demand or increased purchases from other foreign markets. He highlighted that steep tariffs could also adversely affect U.S. consumers.
Exporters' groups have cautioned that new import tariffs could place a heavy burden on India’s small and medium enterprises, which are significantly reliant on the American market. Ajay Sahai, director general of the Federation of Indian Export Organisations, mentioned that for some product lines, profitability could diminish overnight. He attributed this precarious situation to the complexities involved in international trade and market dependencies.
The tariffs coincide with ongoing negotiations wherein the U.S. administration seeks greater access to India's agriculture and dairy sectors. Although India and the U.S. have engaged in five rounds of negotiations for a bilateral trade agreement, a deal remains elusive primarily because India is reluctant to open these vital sectors to cheaper U.S. imports, which could threaten millions of jobs relied upon by Indian citizens. Prime Minister Narendra Modi has committed to protecting the interests of farmers, small businesses, and the dairy industry, asserting that his government will not yield to external pressures.
In reaction to the tariffs, India has initiated plans for local reforms aimed at mitigating the economic impact. The government is currently working on reforms to boost local consumption and enhance its economic resilience. Plans include adjusting the goods and services tax (GST) to reduce costs for essential items ahead of the major Hindu festival of Diwali, scheduled for October. Additionally, discussions between the trade and finance ministries are underway regarding financial incentives, including favorable bank loan rates for exporters.
Moreover, the Indian government is exploring opportunities to expand exports to other regions, specifically Latin America, Africa, and Southeast Asia. Ongoing trade negotiations with the European Union are also expected to gain momentum as India seeks to decrease its economic dependence on the U.S. market.
