US 50% Tariffs on Indian Goods Threaten Jobs and Economic Growth, Possible Impact on Bilateral Trade Agreement

The United States enacted escalated tariffs on a wide array of Indian exports yesterday, potentially inflicting a significant blow on India’s trade sector in its primary export destination.

President Trump initially announced a 25% tariff on Indian goods but later signed an executive order imposing an additional 25%, totaling 50%, due to India’s purchases of Russian oil. This escalated tariff structure could impact approximately $48.2 billion worth of exports, according to Indian government estimates.

Officials have expressed concerns that these new duties could render shipments to the U.S. commercially unviable, potentially leading to job losses and slowed economic growth.

India-US trade relations have grown significantly in recent years but remain susceptible to disputes over market access and domestic political pressures. The potential impact of these tariffs could slow down one of the world’s fastest-growing major economies.

Sectors expected to bear the brunt of this impact include textiles, gems and jewelry, leather goods, food, and automobiles, according to estimates by a New Delhi-based think tank, Global Trade Research Initiative.

Ajay Srivastava, the think tank’s founder and former Indian trade official, stated, “The new tariff regime poses a strategic threat that could erase India’s long-standing presence in the US, causing unemployment in export-driven hubs and weakening its role in the industrial value chain.”

While some sectors such as pharmaceuticals and electronic goods have been temporarily exempted from additional tariffs, providing partial relief for India due to its significant exposure in these sectors, others may face severe challenges. For instance, Puran Dawar, a leather footwear exporter from Agra, fears his industry will suffer substantially unless domestic demand strengthens or other overseas markets increase their purchases of Indian goods.

Dawar’s business with the US has experienced growth in recent years and includes major fashion retailer Zara among his clients. He emphasized that the steep tariffs would ultimately hurt American consumers.

Representatives of exporters have warned that these new import tariffs could negatively impact India’s small and medium enterprises, which are heavily reliant on the US market. Ajay Sahai, director general of the Federation of Indian Export Organizations, stated, “Some product lines will become unviable overnight.”

These tariffs come as the US administration continues to push for increased access to India’s agriculture and dairy sectors. Negotiations for a bilateral trade agreement between India and the US have stalled due to New Delhi’s resistance to opening these sectors to cheaper American imports, citing concerns about job losses for millions of Indians.

Prime Minister Narendra Modi has vowed not to yield to this pressure, stating at a recent rally in Gujarat, “For me, the interests of farmers, small businesses, and dairy are topmost. My government will ensure they aren’t impacted.”

Modi also criticized what he termed the “politics of economic selfishness.” A US delegation had planned to visit New Delhi this week for a sixth round of trade talks but canceled their visit.

In response to these tariffs, the Indian government is working on reforms to boost local consumption and insulate the economy. Measures under consideration include changing the goods and services tax, lowering costs for insurance, cars, and appliances ahead of the major Hindu festival of Diwali in October. The government council will meet early next month to decide whether to cut taxes.

Additional measures being discussed include financial incentives such as favorable bank loan rates for exporters and efforts to expand exports to other regions, particularly Latin America, Africa, and Southeast Asia. Trade negotiations with the European Union could gain renewed urgency as India seeks to reduce its dependence on the US market.