New US Tariffs Take Effect, Hitting Indian Exports with 50% Duties

A new trade policy enacted by the Donald Trump administration has taken effect, resulting in the imposition of a 50 per cent total tariff on a wide range of Indian goods. The measure, which came into effect at 12:01 am Eastern Daylight Time on August 27th, has sparked concern among Indian exporters and has led to a significant escalation in trade tensions between the two countries. The additional 25 per cent tariff, which is being imposed as a “penalty,” is a direct result of India’s continued purchase of Russian crude oil, which the US alleges is indirectly funding Russia’s war against Ukraine. This development, which was officially notified by the US Department of Homeland Security on Tuesday, has effectively pushed India into a limited trade war with its largest export market.

The new tariffs are a major setback for Indian exporters, particularly those in labour-intensive sectors such as gems and jewellery, textiles and apparel, seafood, and handicrafts. According to an analysis by the Global Trade Research Initiative (GTRI), the duties will affect approximately $60.2 billion worth of Indian exports, which is a staggering 66 per cent of India’s total exports to the US. The report also warns that a potential 70 per cent reduction in export volumes could lead to widespread job losses in these sectors. For instance, the gems and jewellery industry in Surat, which has a significant presence in the US market, is expected to be severely impacted, as are textile hubs in Tiruppur and the National Capital Region (NCR). The move has also put key sectors like shrimp exports from Visakhapatnam at substantial risk, with the total duties on some goods rising to as high as 60 per cent.

While other major economies like Japan and South Korea have reportedly bowed to pressure from the Trump administration, India has taken a firm and defiant stance. Prime Minister Narendra Modi, in a public address on Monday, reaffirmed his commitment to the principle of “Atmanirbhar Bharat” (Self-Reliant India), stating that his government will find a way to counter the impact of the tariffs. He assured small entrepreneurs, farmers, and livestock rearers that the government would protect their interests, saying, “No matter how much pressure comes, we will keep increasing our strength to withstand it.” External Affairs Minister S Jaishankar has also been vocal in his criticism of the US policy, labelling it as “unfair, unjustified, and unreasonable.” He has defended India’s decision to purchase Russian crude, stating that it serves the nation’s strategic energy security interests.

In a move to cushion the blow for exporters, the Indian government is reportedly considering a number of measures, including targeted relief for the hardest-hit sectors. The government is also said to be accelerating its efforts to finalise free trade agreements with other major economies, including the European Union and the United Kingdom, to diversify its trade partnerships and reduce its reliance on the US market. The Reserve Bank of India (RBI) Governor Sanjay Malhotra has also expressed confidence that the overall impact on the Indian economy would be minimal, stating that the central bank would provide special support for the impacted sectors. The situation has created a state of uncertainty among exporters, with many scrambling to offer discounts to retain US buyers. This escalation in trade tensions marks a challenging period for the US-India relationship, even as both countries continue to engage in diplomatic and security cooperation.