United States President Donald Trump’s 50 % tariff on Indian items, which is predicted to influence commerce price billions of {dollars} and threat 1000’s of jobs on the earth’s most populous nation, took impact on Wednesday.
The US first slapped a 25 percent tariff on India on July 30 and every week later imposed an additional 25 percent, citing New Delhi’s buy of Russian oil.
The new 50 % fee, one of many US’s highest tariffs, will now apply to a variety of products from gems and jewelry, clothes, footwear and furnishings to industrial chemical substances.
The crushing tariff fee will put India at a drawback in export competitiveness in opposition to China, and can undermine the financial ambitions of Prime Minister Narendra Modi to remodel the nation into a significant manufacturing hub. Till lately, the US was India’s largest trading partner with annual bilateral commerce price $212bn.
So which industries will likely be hit the toughest and the way will it have an effect on US-India relations?
Which sectors will likely be worst hit?
The International Commerce Analysis Initiative (GTRI), a New Delhi-based assume tank, instructed The Monetary Occasions newspaper that Indian exports to the US might fall from $86.5bn this yr to about $50bn in 2026 because of right now’s announcement.
The GTRI mentioned that textiles, gems, jewelry, shrimp and carpets could be worst affected, with the sectors bracing for a 70 % collapse in exports, “endangering lots of of 1000’s of jobs”.
“There will likely be a big impact,” MK Venu, founding editor of The Wire information web site, instructed Al Jazeera.
“Whereas India shouldn’t be an enormous buying and selling accomplice for the US, for India, the US is the biggest buying and selling accomplice,” he mentioned, including that exports could be affected within the areas of textiles, clothes, gems and jewelry, fisheries, leather-based gadgets and crafts.
These are “very, very labour-intensive” and small firms, which can not survive the hit, Venu mentioned concerning the sectors to be affected by the tariffs. “They’ll lose companies to Vietnam, Bangladesh and Pakistan, and different East Asian economies.”
Will any industries be exempt?
The Indian pharmaceutical business has been exempted from quick tariff will increase because of the significance of generic medication in offering reasonably priced healthcare within the US. Roughly half of the US’s generic treatment imports come from India.
In 2024, Indian pharmaceutical exports to the USA amounted to roughly $8.7bn.
In the meantime, semiconductors and client electronics may also be coated by separate, sector-specific US tariffs. Lastly, aluminium and metal merchandise, along with passenger automobiles, may also be topic to tariffs separate from the blanket 50 % fee.
What’s the Indian authorities doing to mitigate the influence?
Prime Minister Modi has pledged to guard farmers, minimize taxes and push for self-reliance within the wake of tariff hikes.
India “ought to turn out to be self-reliant – not out of desperation, however out of satisfaction … Financial selfishness is on the rise globally and we mustn’t sit and cry about our difficulties,” Modi mentioned in his Independence Day speech at New Delhi’s Crimson Fort.
Faisal Ahmed, professor of geopolitics at Fore College of Administration in New Delhi, says rising the home productive capability of India shouldn’t be new. “It was a coverage selection taken by Modi through the COVID-19 pandemic. Trump’s tariffs look set to speed up that course of,” Ahmed instructed Al Jazeera.
On prime of the $12bn earnings tax giveaway introduced earlier this yr, the Indian prime minister additionally mentioned that companies might count on a “large tax bonanza” quickly. It’s additionally understood that Delhi is planning to decrease and simplify the products and companies tax.
This, together with a lift to the salaries of almost 5 million state staff and 6.8 million pensioners (which is able to kick in subsequent yr), might assist India’s financial system retain some progress momentum.
An Indian commerce ministry official instructed Reuters earlier this week that exporters hit by tariffs would obtain monetary help and different giveaways to diversify into markets like Latin America and the Center East.
Venu, who can also be a former editor of the Monetary Categorical newspaper, says that assurances have come from the central financial institution and the prime minister, however there isn’t a actual coverage.
“Who will fund the subsidy? Will it’s taxpayers or a few of the large firms that benefitted from the Russian oil exports? So, there isn’t a readability on the small print of how the subsidies could be supplied. Even when subsidies are supplied, it received’t be sufficient to cushion such an enormous hit,” Venu instructed Al Jazeera from New Delhi.
He mentioned that the federal government didn’t put together for what was coming. “India ought to have had a coverage, it ought to have accomplished its homework as a result of we knew that Trump was not going to relent, he was going to punish India for purchasing Russian oil.”
Ahmed from the Fore College of Administration mentioned that the tariffs “shouldn’t have a big influence on India’s GDP… most likely round 1 %”.
Teresa John, lead economist at Nirmal Financial institution, echoed Ahmed: “We estimate a [negative] influence of about $36bn, or 0.9 % of GDP,” she instructed Reuters.
Earlier this yr, the Worldwide Financial Fund forecast that India’s financial system would develop by 6.4 % in 2026. That would change.
What cause has Trump given for tariffs?
Talks to defuse a commerce warfare broke down after 5 rounds of negotiations, following Trump’s requires India to halt its imports of Russian oil and gasoline.
Regardless of the persistent menace of upper US tariffs, India has continued to purchase Russian crude this yr – albeit at falling ranges.
New Delhi has additionally been hit due to the geopolitical rivalry between Russia and the West. Prime Trump officers, together with US Treasury Secretary Scott Bessent, have accused India of funding Russia’s warfare in opposition to Ukraine. He identified that India’s Russian oil imports went from 1 % earlier than the Ukraine warfare to 37 %. He accused India of “profiteering”.
India’s overseas ministry mentioned that New Delhi would “take all mandatory steps to guard its nationwide pursuits” and identified that Russian oil imports had been pushed by market forces and the vitality wants of the nation’s 1.4 billion folks.
New Delhi has additionally accused Washington of selectively focusing on India for buying Russian oil, when each the European Union and China – with whom Trump has brokered commerce offers – proceed to import vitality from Russia.
Elsewhere, New Delhi pledged to take away levies on sure industrial items from the US and to extend defence purchases – to assuage Trump’s grievances over commerce imbalances. Nevertheless it refused to open its huge farming and dairy sector to low-cost US imports.
Over the course of the yr, farmers crucial of Modi feared that the federal government would decrease its agricultural tariffs as a part of a take care of Trump. However Modi defended the politically delicate agricultural sector, which employs lots of of thousands and thousands of Indians.
For context, the easy common tariff fee that India imposed on agricultural imports was 39 % on the finish of 2024. In contrast, the easy common tariff fee that the US charged on its agricultural imports was 4 %. Trump took umbrage with that.
Trump, who has unleashed a tariff warfare that has shaken the worldwide financial system, has been highlighting the excessive tariffs imposed by India.
“India has been, to us, simply concerning the highest-tariffed nation anyplace on the earth. It’s very laborious to promote to India as a result of they’ve commerce obstacles and really sturdy tariffs,” Trump mentioned throughout Prime Minister Modi’s go to to the US in February.
Final yr, bilateral trade between India and the US stood at roughly $212bn, with a commerce hole of about $46bn in India’s favour.
