Indian workers fear economic downturn under Trump's tariffs – DW – 08/11/2025
After US President Donald Trump ordered additional tariffs on Indian exports last week, anxiety is spreading among millions of workers, especially those in the jewelry and textile industries.
Jagdish Prajapati, 49, is a diamond worker in Surat, one of the world's largest diamond polishing hubs in India's western Gujarat state.
"We have already been grappling with an economic slowdown over the past few years, with problems stemming from the Russia-Ukraine war. The burden of steep US tariffs especially on Indian diamond, gem, and jewellery exports has created more fear," Prajapati, who has been polishing diamonds for over 20 years, told DW.
"Many workshops are already cutting back hours and halting new hiring. If the tariffs come, it will leave families struggling to make ends meet," added Prajapati.
According to the Diamond Workers Union Gujarat, there are about 800,000 to 1 million diamond workers in Gujarat, employed in roughly 6,000 diamond polishing units.
"The US our single largest market, accounting for over $10 billion in exports — nearly 30% of our industry's total global trade. A blanket tariff of this magnitude is severely devastating for the sector," said Kirit Bhansali, chairman of the Gem & Jewellery Export Promotion Council.
"For cut and polished diamonds, half of India's exports are US-bound. With the revised tariff hike, the entire industry may come to a standstill, placing immense pressure on every part of the value chain — from small workers to large manufacturers," added Bhansali.
Trump last week added a 25% tariff rate to a previously announced levy of 25%, bringing the total to 50% for good from India. The White House said India's continued purchases of Russian oil are enabling Russia's war machine in Ukraine, and are undermining US efforts to bring the war to an end. Russia is currently the single largest seller of Indian oil imports.
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The US tariffs apply to Indian exports like gems, textiles, automotive parts and footwear. Electronics, smartphones and pharmaceuticals remain exempt, for now.
Even so, the tariffs threaten a significant portion of India's export economy to the US, which is valued at nearly $87 billion (€74.7 billion) annually, representing about 2.5% of India's GDP.
The 50% rate is due to take effect on August 27, leaving the door open for potential negotiations.
India was one of the first countries to initiate trade and tariff talks with the second Trump administration, when Prime Minister Narendra Modi met Trump in February.
The two leaders had then announced a target to double bilateral trade to $500 billion by 2030.
However, ties have now been strained by the new tariff rate and Trump's insistence that India stop buying Russian oil.
In the textile city of Tiruppur in the southern state of Tamil Nadu, millions are employed in knitwear and garment factories.
About 30% of Tiruppur's exports go to the US, particularly in the cotton and knitwear segment. This amounted to $5.1 billion (€ 4.4 billion) in the last financial year, according to exporters associations.
The industry, which directly employs around 1.25 million workers in the wider textile belt of Tiruppur, Karur and Coimbatore, faces the risk of 100,000–200,000 job losses if exports contract in the coming months.
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"With prices of Indian goods rising in the US due to these duties, trade is expected to suffer significantly. It will hit the industry and we will need to see how this plays out," K M Subramanian, President of the Tirupur Exporters' Association, told DW.
The tariffs are set to make Indian textiles more expensive for US buyers compared to competitors like Vietnam, Bangladesh, or Pakistan.
Tiruppur has a reputation for high-quality, eco-friendly knitwear, and has established relationships with global brands like Walmart, GAP, and Costco.
"Standalone exporting companies will be hit first. When the first round of 25% tariffs was imposed, we were sent to the intensive care unit. But with the additional 25% penalty tariff because of Russian oil, it looks as if we have been placed in a coma," Kumar Doraiswamy of Eastern Global Clothing told DW.
"It has put exporters in crisis, which threatens jobs, revenues, and the global standing of India's textile sector," added Doraiswamy.
Similarly, India's automotive components sector faces the risk of declining orders as tariffs increase costs for buyers in the US.
From 2024 to 2025, the US accounted for 27% of the $22.9 billion worth of auto components exported from India.
"It is a headwind... a big one. However, a lot of other competing countries, including China, are in the same boat. Honestly it is a wait-and-see situation as one does not know what tomorrow holds," Vinnie Mehta of the Automotive Component Manufacturers Association (ACMA) of India told DW.
"The US is our largest export market, followed by the EU," added Mehta.
India has been actively engaging in ongoing trade talks with the US to find diplomatic solutions and de-escalate trade tensions amid the row over Russian oil.
At the same time, New Delhi is encouraging Indian industries to diversify exports beyond the US by exploring new international alliances and trade deals.
Affected sectors could see also some relief from the Indian government, such as credit guarantees and loan moratoriums for small and medium enterprises.
Lekha Chakraborty, a professor at National Institute of Public Finance and Policy in New Delhi, told DW that short-term, sector-specific setbacks will be massive if economic diplomacy fails to avert the high tariff rate.
Chakraborty said India can overcome the crisis by diversifying its trading partners. She added India's central bank can also set policies that will attract more foreign investment, such as effectively managing interest rates.
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