Steep US Tariffs on Many Indian Products Began Today

Steep U.S. tariffs on a range of Indian products took effect Wednesday, threatening a serious blow to India’s overseas trade in its largest export market.

President Donald Trump signed an executive order imposing an additional 25% tariff on top of a 25% tariff due to India’s purchases of Russian oil. It brings the combined tariffs imposed by the U.S. on its ally to 50%.

The Indian government estimates the tariffs will impact $48.2 billion worth of exports. Officials have warned the new duties could make shipments to the U.S. commercially unviable, triggering job losses and slower economic growth.

The purpose is to get India to stop buying Russia’s oil, and bring Russia to the negotiating table.

I really don’t like this tactic. It makes the US untrustworthy as a trading partner. It strains our relationship. However, President Trump is running out of options to stop the Ukraine-Russia war. One has to wonder what happens if Russia gives more concessions and Ukraine still insists on no concessions.

Exporters are looking at other markets. However, that works in reverse also, giving India’s competitors opportunities.

At the same time, India and Russia have pledged to increase their annual trade by 50% to $100 billion over the next five years. New Delhi has struck a defiant tone, saying it will keep buying Russian oil as long as it’s financially viable

Relations worsened after Trump criticized India for buying Russian oil, accusing it of funding Vladimir Putin’s war in Ukraine. In response, New Delhi defended its purchases, saying that they help stabilise energy markets and that it will continue buying Russian oil “based on financial benefits.”

This has pushed India further towards BRICS.

It Could Wipe Out India’s Presence in the US

Estimates by New Delhi-based think tank Global Trade Research Initiative suggest labor-intensive sectors such as textiles, gems and jewelry, leather goods, food and automobiles will be hit hardest.

In the fiscal year 2024-25, India’s goods exports to the United States amounted to about $86.5 billion, marking an 11.6% increase from the previous year. This growth is indicative of the strengthening trade relationship between the two countries, with the USA being India’s largest trading partner.

“The new tariff regime is a strategic shock that threatens to wipe out India’s long-established presence in the U.S., causing unemployment in export-driven hubs and weakening its role in the industrial value chain,” said Ajay Srivastava, the think tank’s founder and a former Indian trade official.

Precious stones, electronics, pharmaceuticals, and machinery are largely affected.

Key Export Categories

Precious Stones and Jewelry: India is a major supplier of diamonds, gold jewelry, and precious stones. Exports in this category are significant, with values ranging from $5.3 billion to $11.9 billion depending on the reporting standards.

Electronics and Electrical Equipment: This includes smartphones, telecom equipment, and other electronic goods, contributing around $12-14 billion to exports. The demand for Indian electronics has been bolstered by favorable tariff shifts in the USA.

Pharmaceuticals: Often referred to as the “pharmacy of the world,” India exports a wide range of pharmaceutical products, including generic medicines and vaccine intermediates, with exports valued at approximately $10.7 billion.

Machinery and Engineering Goods: This category includes industrial machinery, vehicles, auto parts, and other engineering products, accounting for about $2.7 to $2.8 billion in trade value.

Petroleum Products: Petroleum products amount to over $2 billion.

Apparel and Textiles: India continues to export a variety of textiles, including cotton and silk garments, with exports valued between $2.5 and $3.3 billion.

Organic Chemicals: This includes a range of chemicals, with exports valued at approximately $2.5 to $3.6 billion.