India is bracing for economic turbulence as 50% tariffs on exports to the United States take effect on Wednesday, following Washington’s decision to punish New Delhi for continuing purchases of Russian oil.
The duties, announced by President Donald Trump, were originally set at 25% but doubled earlier this month after he signed an executive order imposing another 25%. The levies, which apply to about £36 billion ($48.2 billion) worth of Indian goods, are paid by US importers but are already triggering reduced orders and higher consumer prices.
Indian officials warn the tariffs could render many shipments to the US commercially unviable, threatening jobs and slowing economic growth. A New Delhi-based think tank, the Global Trade Research Initiative, estimates that labour-heavy sectors such as textiles, gems and jewellery, leather goods, food, and automobiles will be hardest hit.
“The new tariff regime is a strategic shock that threatens to wipe out India’s long-established presence in the US, causing unemployment in export-driven hubs and weakening its role in the industrial value chain,” said Ajay Srivastava, the group’s founder and a former trade official.
Pharmaceuticals and electronic goods have been spared the additional duties, offering some relief to major exporters. But trade groups say smaller firms, especially those heavily reliant on the US market, face the prospect of closures. “It’s a tricky situation. Some product lines will simply become unviable overnight,” said Ajay Sahai, director general of the Federation of Indian Export Organisations.
The tariffs also cast a shadow over stalled negotiations on a bilateral trade deal. Five rounds of talks have failed to resolve US demands for wider access to India’s agriculture and dairy markets—sectors New Delhi has fiercely protected. Prime Minister Narendra Modi, speaking at a rally in Gujarat, vowed not to yield.
“For me, the interests of farmers, small businesses and dairy are topmost. My government will ensure they aren’t impacted,” he said, accusing Washington of pursuing a “politics of economic selfishness.”
India has, in the meantime, begun working on reforms to boost local consumption. The Trade Ministry is also weighing steps to expand exports into other regions, especially Latin America, Southeast Asia and Africa. Negotiations with the European Union could also gain renewed urgency as India moves to reduce dependence on the US market.
A planned sixth round of talks was cancelled this week after a US delegation scrapped its trip to New Delhi, underscoring the strain on relations between the two trading partners.