Trump hits India with 50% tariff: Tharoor slams US, experts warn of GDP hit

Business Standard

a day ago

US President Donald Trump's latest executive order imposing an additional 25 per cent tariff on Indian goods — citing continued Russian oil purchases — has triggered a wave of criticism and concern across political and economic circles in India.
With the latest levy, India will now face an effective tariff rate of 50 per cent on key exports to the US, a level matched only by Brazil. It also puts Indian exporters at a clear disadvantage vis-a-vis other Asian export powerhouses such as Vietnam, Bangladesh, and the Philippines, which have negotiated lower rates in return for zero tariffs on US goods.
Tharoor calls out US' 'double standards'
'Uranium, palladium, there are various things they (US) are importing from Russia. There is, unfortunately, a certain double standard involved. They have given the Chinese a 90-day break, but the Chinese are importing far more Russian oil than we are,' Tharoor told news agency ANI.
He expressed disappointment at the move, especially considering India's perception of the current US administration as 'well disposed' toward New Delhi. 'So clearly this has not been a particularly friendly gesture from a country we thought was well disposed towards us, an administration that we thought was well disposed. Very clearly, we have to act accordingly, and we will have to learn our lessons from this experience,' the member of Parliament for Thiruvananthapuram said.
Highlighting potential retaliatory action, he added: 'I think there is certainly a likelihood that there will be some pressure within India now to impose comparable reciprocal tariffs on American exports to India. So I think we're going to have to really start looking at other trading partners much more in these circumstances.'
On the economic fallout, he was blunt in his assessment: 'If that takes our total tariffs to 50 per cent, then that's going to make our goods unaffordable to a lot of people in America... If you look at people like Vietnam, Indonesia, Philippines, even Bangladesh and Pakistan having lower tariffs than us, then ultimately people will not be buying goods from us in America if they can buy them cheaper elsewhere.'
He concluded by calling for a pivot towards other global partners: 'This means we need to very seriously diversify to other countries and other markets... We now have an FTA with the UK. We are talking to the EU. There are many countries in which hopefully we would be able to, but in the short term, it is definitely a blow.'
GDP downgrade likely: Economists
Meanwhile, economics and trade experts flagged the risk to exports, competitiveness, and GDP growth. Sakshi Gupta, principal economist at HDFC Bank, warned of a tangible macroeconomic impact if no deal is struck: 'While Trump's order gives another 21 days for a deal to breakthrough, in case it does not we will have to significantly lower FY26 GDP growth forecast to below 6 per cent, baking in a 40-50 bps hit. This would be double our earlier estimates (of GDP hit from higher tariffs),' she told Reuters.
A Prasanna, chief economist, ICICI Securities Primary Dealership, told Reuters: 'The additional tariffs will come into effect after 21 days but it will be on top of earlier 25 per cent so the total 50 per cent rate will be a big negative for Indian exports. However, some key segments like electronics and pharma continue to be exempt from this additional rate. At 50 per cent rate, many Indian exports will face a handicap versus countries that are in the 15-30 per cent bucket.'
Nirmal Bang Institutional Equities lead economist Teresa John warned of diplomatic pressure on India, saying: 'The pressure is mounting on India to come to a trade agreement. India may agree to significantly reduce Russian purchases over a phased manner and diversify to other sources.'
Gaura Sen Gupta, economist at IDFC First Bank, told Reuters that the tariff increase will elevate India to the highest bilateral tariff rate globally from next month. 'Post this order bilateral tariffs will rise to 50 per cent, which would be the highest applied from August onwards. This definitely increases the downside risk to the 2025-26 GDP estimate. For now, if the tariffs persist till March 2026, total downside risk is estimated at 0.3 per cent to 0.4 per cent.'
Trump hits India with 50% tariff: What next?
With the 21-day window before the tariffs kick in, the Indian government will have to either negotiate a resolution with Washington or brace for strategic realignment in its global trade relationships. Experts expect New Delhi to accelerate diversification efforts and prioritise markets where trade terms are more favourable.