Trump hits India with 50% tariffs: What's at stake and what next?

India Today

2 hours ago

The US has imposed a sweeping 50% tariff on Indian exports, pushing US-India trade tensions to a rare low in over two decades. The move primarily targets India's imports of Russian oil, which Washington claims is funding Russia's war in Ukraine.Nearly 55% of India's exports to the US will face these tariffs, affecting key sectors such as textiles, gems and jewellery, leather goods, auto parts, and seafood.advertisementIn 2024, India will export around $87 billion worth of goods to the US, its largest export market. These tariffs place Indian exporters at a 30-35% cost disadvantage compared to competitors like Vietnam and Bangladesh, who face much lower US duties.
The impact is severe for India's export-dependent economy. Experts describe this as the worst crisis in recent US-India relations.Michael Kugelman of the Wilson Centre called it 'the worst crisis' in two decades of strategic ties, warning about the widespread disruptions it could cause, although he noted that the broader relationship still retains resilience.Following the additional tariffs, there were some immediate effects. The Indian rupee weakened, and stocks of export-reliant companies dropped. Reports indicate US buyers have begun pausing Indian orders, seeking alternative suppliers in countries like Vietnam and Bangladesh.Analysts warn that without quick resolution, these sudden tariffs could trigger supply chain disruptions and substantial layoffs in labour-intensive sectors.INDIA MAINTAINS STANDThe Indian government has strongly objected to the tariffs, calling them 'unfair, unjustified, and unreasonable.' Officials stressed that India's oil imports from Russia are driven by the need to ensure energy security for its 1.4 billion people amid a volatile global market.The Ministry of External Affairs highlighted that other countries also import Russian oil and accused the US of unfairly singling out India. While trade talks remain stalled, a 21-day window before the second tranche of tariffs take effect offers limited scope for diplomatic engagement and possible partial rollback if India amends its Russian oil purchases.The tariff escalation comes at a time when India and the US had been engaging in trade talks, which collapsed over contentious issues such as India's unwillingness to open sensitive agricultural sectors to US exports.Trump's administration had pushed for slashing India's trade surplus and increasing market access, but stalled negotiations ended with the tariffs.IMPACT ON INDIAEconomists estimate the direct impact on India's GDP growth may be moderate—a contraction of about 0.2 to 0.6 percentage points in 2025, but warn the damage to export sectors and employment may be much larger.advertisementA PHD Chamber of Commerce report projects the tariffs will initially hit $8 billion of Indian exports, with wider economic effects as duties take full effect.Notably, major industries like auto components, which export about $7 billion annually to the US, also face exposure to these tariffs, threatening jobs and investment.While electronics and pharmaceuticals are exempted for now, crucial manufacturing and labour-intensive sectors bear the brunt.WHAT HAPPENS NEXT?Political leaders and business voices in India call for rapid market diversification toward Europe and Asia to reduce dependency on the US. Senior Congress leader Shashi Tharoor called the tariffs a 'blow' that will make Indian goods unaffordable in the US and urged urgent expansion into alternative markets with existing free trade agreements.Prime Minister Narendra Modi and officials have vowed to protect farmers, fishermen, and workers, emphasising national interest and energy security.While the new tariffs could have a devastating impact on India's export sector, some voices in Indian industry are calling for a bold pivot. Business leader Anand Mahindra argues the moment could act as a trigger—much like the 1991 crisis—for long-overdue structural reforms that could transform India's economic trajectory.The 50% tariff marks a key turning point in US-India trade ties, testing both economic resilience and political resolve. The next three weeks will be crucial, as New Delhi weighs how to protect energy security while defending export revenues and jobs.- EndsTune InMust Watch