US tariffs of up to 50% on Indian exports, effective Wednesday, August 27, 2025, threaten India’s trade amid tensions over Russian oil purchases. The United States will impose an additional 25% tariff on Indian exports from Wednesday, August 27, 2025, raising duties to 50%, as a penalty for India’s continued purchase of Russian oil, severely impacting sectors like textiles and gems. Announced by President Donald Trump, the move escalates trade tensions.
Why This Matters for South Asia
Indian exports, valued at USD 86.5 billion annually to the US, are a cornerstone of South Asia’s economy, contributing 2.2% to India’s GDP. The tariffs, among the highest globally, could disrupt regional trade, weaken the Indian rupee, and affect millions of jobs in export-driven industries across South Asia.
Tariff Impact on Indian Exports
The US tariffs, combining a 25% levy effective August 7, 2025, with an additional 25% penalty, target India’s USD 48.2 billion in merchandise exports to the US. Sectors like textiles, gems and jewellery, leather, marine products, chemicals, and auto components face significant exposure, with 55% of India’s US-bound exports at risk. Industry estimates suggest a USD 4–5 billion drop in engineering exports alone, with GDP growth potentially declining by 0.2–0.5% from a projected 6.5% for FY 2025-26.
A statement from India’s Ministry of Commerce and Industry on Monday, August 18, 2025, noted, “The government is assessing the impact and engaging with exporters to mitigate disruptions.” Small and medium enterprises (SMEs), particularly in textiles and leather, face reduced competitiveness against rivals in Vietnam and Bangladesh, where tariffs are lower at 20% and 37%, respectively.
China and Regional Competitors
China, facing a 30% US tariff, remains a key competitor for Indian exports. The Global Trade Research Initiative (GTRI) reported on Thursday, August 8, 2025, that India’s higher tariff burden compared to China and Vietnam could erode its market share in the US, particularly for textiles and apparel. However, exemptions for pharmaceuticals, semiconductors, and energy resources provide temporary relief for India’s generic drug exports, which account for 50% of the US market.
India’s Response to Tariffs
India is exploring diplomatic and economic countermeasures. Prime Minister Narendra Modi chaired a cabinet meeting on Friday, August 8, 2025, to strategise, with officials indicating no immediate retaliatory tariffs. Instead, India is diversifying export markets, targeting 50 countries, including West Asia and Africa, according to a government official cited by FMT on Tuesday, August 26, 2025. The Ministry of Commerce is also considering interest subsidies and loan guarantees for exporters.
A senior Indian official, speaking anonymously to Reuters on Thursday, August 7, 2025, said, “The 21-day window before the new tariffs signals room for negotiations.” India has paused plans to procure US arms, including Javelin missiles, as a sign of discontent, per Reuters on Saturday, August 9, 2025.
Background
The US-India trade relationship, valued at USD 190 billion in 2024, has been strained by five rounds of inconclusive trade talks, stalling over US demands for access to India’s agriculture and dairy markets. India’s USD 52 billion in Russian oil imports last year triggered the additional 25% tariff, as Trump aims to pressure nations trading with Moscow amid the Russia-Ukraine conflict. The tariffs follow a 10% baseline duty and a 25% reciprocal tariff announced on Tuesday, April 2, 2025.
What’s Next
India’s commerce ministry is set to hold virtual talks with US counterparts to negotiate tariff relief before September 17, 2025, when goods in transit are exempted. Modi’s upcoming visit to China for the SCO summit on Saturday, August 31, 2025, may bolster trade diversification efforts, softening the blow to Indian exports.
Published in SouthAsianDesk, August 26th, 2025
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