The Indian rupee hit a record low of 91.075 against the US dollar this week as trump india tariffs and stalled negotiations with the Trump administration continue to pressure the currency. Steep 50% duties on Indian exports, combined with persistent portfolio outflows, have driven a 6% decline in the rupee this year.
Investors remain cautious amid the india us trade impasse. Analysts describe the lack of a bilateral deal as the primary overhang for Indian assets. The Reserve Bank of India (RBI) intervened in currency markets on Wednesday to limit losses, but economists expect further weakness without tariff relief.
Trump Impact on Rupee Deepens Currency Slide
The rupee’s real effective exchange rate stands at 96 against a basket of currencies, the lowest in over a decade. Citi data shows this compares with a decade-long average of 103. A widening trade deficit and record USD 18 billion equity outflows this year have compounded the pressure from trump india tariffs.
Vivek Rajpal, Asia macro strategist at JB Drax Honore, said market patience is running thin after months of talks yielded no agreement. “It is a good entry point for Indian assets, but first the market needs confidence that the tariffs are only temporary,” he noted.
The 50% tariffs, imposed earlier in 2025, leave India exposed compared with other Asian nations that secured agreements or moratoriums with Washington. India’s exports have shown resilience in recent months, leaping in November despite the duties, but the overall impasse weighs heavily on sentiment.
Indian Rupee Record Low Signals Broader Risks
The rupee has emerged as one of the worst-performing emerging market currencies in 2025. Dollar-demand from importers and hedging activity accelerated the slide past the 91 mark. Traders reported mild RBI dollar sales to curb volatility, yet the central bank has signalled it will not heavily defend against market fundamentals.
Jean-Charles Sambor, head of emerging markets debt at TT International Asset Management, said recent depreciation stems partly from geopolitical risks affecting current account expectations. “We believe some of this risk may be now overstated,” he added.
A depreciating rupee offers some offset by making exports cheaper in dollar terms, but it creates challenges for dollar-indexed global investors. Kunjal Gala, head of global emerging markets at Federated Hermes, highlighted the dilemma: depreciation aids export competitiveness but erodes returns.
Background: Roots of India US Trade Impasse
Trade frictions escalated after the Trump administration doubled tariffs to 50% in August 2025, citing India’s continued imports of Russian oil as a key irritant. President Trump has maintained that duties will remain until New Delhi ceases such purchases.
Prime Minister Narendra Modi held his third call with President Trump since the tariff hike on December 11, reviewing bilateral relations. Officials described the talks as constructive, but no immediate breakthrough emerged.
India’s Chief Economic Advisor stated in a December 11 interview that he expects a trade deal by March 2026. The comment offered limited reassurance to markets facing immediate trump impact on rupee.
Past tensions during Trump’s first term saw the US revoke India’s preferential trade status under the Generalized System of Preferences. Current measures prove more punitive, targeting broader export categories amid Washington’s push for reciprocal trade.
What’s Next for Trump India Tariffs and Currency
Analysts anticipate continued rupee weakness absent swift progress in negotiations. HSBC notes the currency acts as a shock absorber for external pressures, including the india us trade impasse.
Brokerages including Citi, Goldman Sachs and JP Morgan have upgraded Indian stocks for 2026, citing potential rate cuts and rebound. Yet near-term risks from trump india tariffs dominate outlook.
Jitania Kandhari, deputy chief investment officer at Morgan Stanley Investment Management, compared the situation to the Chinese yuan’s 12% fall during US-China trade tensions in Trump’s first term. Persistent tariffs could force similar adjustment in the rupee.
Resolution hinges on upcoming talks. Without a deal, trump india tariffs will likely sustain downward pressure on the currency into 2026.
Published in SouthAsianDesk, December 17th, 2025
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