Trump tariff hike to 50% on Indian goods sparks calls for self-reliance

Business Standard

2 days ago

US President Donald Trump's executive order imposing an additional 25 per cent tariff on Indian goods—bringing the effective rate to 50 per cent on key exports—has prompted Indian entrepreneurs and startup leaders to call for greater economic independence and reduced reliance on US markets.
The tariff escalation, which doubles existing trade barriers, threatens to disrupt India's $80 billion annual exports to the United States and could particularly impact the country's burgeoning technology and e-commerce sectors. Analysts warn that Indian startups with significant US exposure may face immediate headwinds, while companies dependent on American components or customers could see margins compressed.
The move has galvanised prominent Indian business leaders to advocate for a more self-reliant economic strategy. Zomato Chief Executive Deepinder Goyal said the tariffs represent a broader pattern of global powers attempting to constrain India's growth ambitions.
'Global powers will always bully us, unless we take our destiny in our own hands,' Goyal wrote in a LinkedIn post, calling for India to "become the world's largest, most unapologetic superpower" in economy and technology.
Ronnie Screwvala, founder of education technology company upGrad, characterised the US as a 'fair-weather country' and urged Indian entrepreneurs to view the trade tensions as an opportunity to strengthen domestic markets and reduce foreign dependence. He called for unleashing entrepreneurship to build India's consumption story, particularly by targeting the country's 600 million rural population.
The tariff increase comes as India's startup ecosystem has grown increasingly integrated with global supply chains and US investment flows, raising questions about how quickly companies can pivot toward domestic and alternative international markets.
Indian exporters are possibly set to face a setback from the US's latest tariff hikes, which will be implemented in two phases—an additional 25 per cent from 8 August and increased to 50 per cent by 27 August, according to consulting firm EY.
'These sharp increases in import duties are expected to affect not only traditional sectors but also India's growing startup ecosystem, with startups in skincare, wellness, personal care and FMCG among those particularly impacted,' said Vimal Pruthi, partner, international trade, EY India.
Pruthi said Indian textiles may lose price competitiveness, as Bangladesh and Vietnam face only 20 per cent tariffs—far lower than India's revised 59 per cent. Similarly, Indian marine exports risk losing US market share with tariffs rising to 58.26 per cent, while countries like Ecuador face just 15 per cent. A jump to 52 per cent duty on gems and jewellery could shift US sourcing to China and the UAE, which face much lower tariffs.
He added that the recent tariffs pose challenges for Indian electronics and IT hardware exports by potentially increasing costs and affecting competitiveness. While IT services aren't directly impacted, Pruthi said the measures may discourage foreign investment in Indian tech manufacturing. 'The long-term effects will largely depend on trade negotiations and India's success in diversifying its export markets,' he said.
Jaideep Kewalramani, head of the employability business and chief operating officer at TeamLease EdTech, said the new tariffs threaten to erode profit margins and competitiveness for startups in technology, food and beverage, textiles and jewellery.
'With this change, margin absorption becomes an impossibility, and the bulk of the load will move to the consumer, pushing them toward alternate providers,' said Kewalramani. 'Most players will lose out right out of the gate when marketplace algorithms downgrade their products due to pricing. Someone who was selling, let's say, tea at $9.99, will fall off the grid.'
He said startups can find alternate markets, but the next few days will require significant adjustment. 'The worry is that cash-strapped startups should not go under before they can pivot. The entire ecosystem—venture capitalists, bankers, advisors, supply chain providers, platforms et al—must come together to ensure startups can weather this storm,' Kewalramani added.
Vijay Kumar, CEO of the Express Industry Council of India, said once the tariffs kick in, sectors like garments, auto components, leather and handicrafts—served by the express industry—could be impacted. 'There is no doubt that the impact would be substantial if and when the additional 25 per cent becomes effective,' Kumar said.
India has been focused on the China+1 strategy for the past two to three years, with several startups engaging in contract manufacturing across sectors to serve export markets. Several marketplaces have also emerged targeting this corridor.
'Some of these will need to recalibrate their business models to align with the new world view—more focus on domestic consumption, more streamlined supply chains, and diversification of target markets to navigate the recent turbulence,' said Pearl Agarwal, founder and managing partner at Eximius Ventures. However, she added that enterprise SaaS and tech companies remain relatively insulated. 'As a VC, we are diligently watching the foreign exchange rate as well, given that the capital supply for this sector has historically been global.'