India is facing economic strain with a deepening trade dispute with the United States after President Donald Trump announced a suspension of trade negotiations on August 7, 2025, citing India’s high tariffs and its continued import of Russian oil. The White House escalated tensions by imposing a 50% tariff on Indian goods, doubling the previous 25% levy, effective in 21 days. The decision, framed as a response to “national security concerns” tied to India’s trade policies, has sparked widespread anxiety among Indian businesses and workers.
Economic Strain on India’s Textile Industry
“This could ruin us,” said Anil Sharma, a textile exporter in Surat, whose shipments to the US face crippling costs. India’s textile industry, which employs over 45 million people and accounts for 12% of the country’s exports, is among the hardest hit. Electronics, pharmaceuticals, and agricultural goods are also at risk, with economists projecting a potential 0.2-0.3% dip in India’s GDP growth if the tariffs persist. The Ministry of External Affairs labeled the US tariffs “unjustified,” emphasizing that India’s import of Russian oil—estimated at 35-40% of its total crude supply—is critical to meeting the energy demands of its 1.4 billion population amid global price surges.
Background of Trade Dispute
The roots of the trade dispute trace back to ongoing disagreements over India’s protective tariffs, which range from 10-100% on goods like automobiles and agricultural products. The US has long pressed for lower tariffs to boost bilateral trade, which reached $191 billion in 2024. Trump’s administration also criticized India’s neutral stance on the Russia-Ukraine conflict, particularly its discounted oil purchases, which surged after Western sanctions on Moscow. India defends these imports as a pragmatic move to stabilize fuel prices, with a senior official stating, “We’re protecting our people, not funding wars.”
The tariff hike threatens small and medium enterprises the most. In Ludhiana, Punjab, garment factory owner Priya Kaur shared her fears: “We’ve worked hard to build US clients, but these tariffs could wipe out our margins.” The Indian government has vowed to retaliate with reciprocal tariffs on US goods like soybeans and tech products, potentially escalating the trade dispute further. Prime Minister Narendra Modi, addressing a rally in New Delhi, promised to safeguard farmers and small businesses, calling the US move “a challenge we’ll overcome together.”
The broader implications are stark. India’s role as a key US partner in countering China’s influence in the Indo-Pacific is now under strain, with analysts warning of a cooling in diplomatic ties. The Confederation of Indian Industry estimates that prolonged tariffs could disrupt supply chains, raise consumer prices, and dampen investor confidence. Meanwhile, workers like Anil and Priya face an uncertain future, caught in a geopolitical standoff. As both nations dig in, the trade dispute casts a long shadow over India’s economic hopes, leaving millions bracing for its impact.
Published in SouthAsianDesk, August 8th, 2025
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