U.S. tariff increase warning shakes India
The potential 50% U.S. tariff on Indian exports, scheduled to take effect from August 27, 2025, is causing significant concern among Indian exporters, particularly in sectors such as garments, textiles, and seafood. These sectors heavily rely on exports to the U.S. market.
Currently, a 25% tariff is in place, but the additional 25% tariff would raise the total tariff to 50% on certain Indian goods. This increase could price Indian exports out of the U.S. market to some extent, given that U.S. importers and consumers would face higher costs.
The new tariffs could potentially halve the price competitiveness of Indian exports, leading to declines in export volume and revenue for these sectors. Exporters might struggle to absorb the cost or pass it all to consumers, resulting in lower demand.
The government has criticized these tariffs as pressure tactics and emphasized India’s national interest priorities in trade negotiations with the U.S., indicating potential diplomatic friction but limited immediate relief for affected export sectors.
The Global Trade Research Initiative predicts a potential 60 percent drop in U.S. sales in 2025 in sectors such as garments. In 2024, India shipped goods worth about $87 billion to the United States.
Indian exporters, such as Vijay Kumar Agarwal, chairman of Creative Group with nearly 80% exposure to the U.S. market, are rushing to fulfill orders before Aug. 27. Some of India's biggest apparel makers are looking to move their U.S. orders to lower-duty countries like Vietnam, Bangladesh, Ethiopia, and Kenya.
The increased tariffs are intended to deprive Russia of revenue for its military offensive in Ukraine. However, they threaten to upend low-margin, labor-intensive industries in India, such as gems and jewelry, textiles, and seafood.
Economist Garima Kapoor from Elara Securities stated that at a 50% tariff, no product from India can stand any competitive edge. Gokaldas Exports may boost production in Ethiopia and Kenya, which have a 10% tariff. Pearl Global Industries has reported that some of its U.S. customers have asked for orders to be produced in lower-duty countries.
The increased tariffs now threaten the livelihoods of hundreds of thousands of people in India. Fresh orders from some U.S. buyers are beginning to dry up, threatening millions of dollars in future business. U.S. President Donald Trump has threatened to double tariffs on imports from India.
In response to these tariffs, India is seeking alternatives to replace around a third of its current oil supply from abroad, given that India is one of the world's largest crude oil importers.
Despite not being an export powerhouse, India still has significant trade with the United States. This scenario underscores the critical vulnerability of Indian export sectors to tariff policies and the importance of ongoing trade negotiations.
The escalating tariffs on Indian exports, particularly in sectors such as general-news like garments, textiles, and seafood, could lead to a decline in export volume and revenue due to reduced price competitiveness (politics). As a result, Indian exporters might struggle to maintain their livelihoods and are seeking alternatives, such as moving orders to lower-duty countries (general-news).
