US tariffs on Indian exports rise to 50%, impacting textiles and jewellery, while pharmaceuticals and smartphones are spared. The United States imposed a 50% tariff on Indian exports effective Wednesday, August 27, 2025, targeting key sectors like textiles, gems, jewellery, and shrimp, while exempting pharmaceuticals, smartphones, and energy products. The move, driven by India’s continued purchase of Russian oil, escalates trade tensions, threatening India’s largest export market.
Why This Matters for South Asia
The US is India’s top export destination, with bilateral trade reaching USD 129 billion in 2024. The tariffs, affecting 55% of India’s USD 87 billion exports to the US, could disrupt supply chains, reduce competitiveness, and lead to job losses in labour-intensive sectors, impacting millions across South Asia’s economic hubs.
Tariff Impact on Indian Exports
The US Department of Homeland Security confirmed the tariff hike, doubling duties from 25% to 50% after failed negotiations. Goods shipped before 12:01 AM EDT on August 27, 2025, and cleared by September 17, 2025, are exempt if declared with customs code HTSUS 9903.01.85. Affected sectors include:
Gems and Jewellery
The US accounts for USD 10 billion of India’s gems and jewellery exports, nearly 30% of the sector’s global sales. In Surat, a global diamond-processing hub, orders are declining as buyers hesitate. “The 50% tariff makes our products uncompetitive,” said a Surat-based exporter. Large firms are exploring relocation to countries like Botswana, which face a 15% tariff.
Textiles and Apparel
Textile exports to the US, valued at USD 10.8 billion annually, face effective duties of 63.9%. The Tiruppur cluster in Tamil Nadu, a knitwear hub employing over 600,000 workers, is severely hit. “We’re losing our price edge against Vietnam and Bangladesh,” said SC Ralhan, president of the Federation of Indian Export Organisations.
Shrimp and Seafood
India’s USD 2.6 billion seafood exports, with shrimp comprising 40%, face 60% duties. Competitors like Ecuador, with a 15% tariff, gain an advantage. “Order pauses are already hurting farmers,” said an exporter from Visakhapatnam.
Auto Components
Auto component exports worth USD 6.6 billion in 2024 face mixed impacts. Parts for cars and small trucks (USD 3.4 billion) are subject to a 25% tariff, while commercial vehicle components (USD 3 billion) face the full 50%. Companies like Bharat Forge are affected.
Exempted Sectors
Pharmaceuticals, smartphones, and energy products are spared. India’s USD 3.6 billion pharmaceutical exports, led by firms like Dr Reddy’s and Sun Pharmaceutical, remain duty-free due to their role in affordable US healthcare. Smartphone exports (USD 7 billion in 2024), driven by Apple suppliers like Tata Electronics, are also exempt. Energy exports, including solar and wind equipment from Reliance Industries, face no tariffs.
Economic and Social Fallout
The Global Trade Research Initiative estimates a 40–50% drop in affected exports, potentially reducing India’s US exports to USD 49.6 billion in FY26. This could shave 0.5% off India’s GDP and threaten jobs in MSME-dominated sectors. “The tariffs are a strategic shock, weakening India’s role in global supply chains,” said Ajay Srivastava, GTRI founder.
US consumers may face higher prices for textiles, jewellery, and seafood, while competitors like Vietnam and Ecuador benefit. India’s government is exploring support measures, including loan moratoriums and export diversification to Africa and Southeast Asia.
Background
The tariffs stem from US objections to India’s Russian oil purchases, seen as undermining Western sanctions. An initial 25% tariff was imposed on August 7, 2025, escalating to 50% after failed talks. India’s Ministry of External Affairs called the move “unjustified,” with Prime Minister Narendra Modi vowing to protect small businesses and farmers.
What’s Next
India may pursue trade agreements with the EU and ASEAN to offset losses. The government is also considering financial incentives and GST reforms to boost domestic consumption. Exporters face challenges adapting to the 50% Trump tariff, but diversification and government support could mitigate long-term impacts.
Published in SouthAsianDesk, August 27th, 2025
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