India is suddenly at the center of a geopolitical storm after former U.S. President Donald Trump announced a sharp increase in tariffs on Indian goods—from 25% to a staggering 50%. This decision, tied to India’s continued purchase of Russian oil, has triggered strong reactions from New Delhi and is being labeled “unfair” and “unjustified” by Indian officials.
The new tariff rates are set to take effect on August 27, giving India just 20 days to decide its next move. If implemented, India would become the most heavily taxed U.S. trading partner in Asia, placing it on par with Brazil.
Why India?
Washington’s latest move is intended to pressure countries trading with Russia, cutting off key revenue streams and forcing a possible ceasefire in the ongoing Ukraine conflict. While nations like China and Turkey also buy Russian oil, the U.S. has chosen to target India—a country it recently labeled a “strategic partner.”
Impact on India’s Economy
India exports approximately $86.5 billion worth of goods annually to the U.S., which accounts for 18% of its total exports and 2.2% of its GDP. A 50% tariff could severely damage these exports, especially in labor-intensive sectors like textiles, gems, and jewelry.
Rakesh Mehra of the Confederation of Indian Textile Industry called the move a “huge setback,” stating that Indian companies simply cannot absorb this kind of cost hike.
Even a 25% tariff could knock 0.2–0.4% off India’s GDP growth. Experts say if these levies last, it could be equivalent to a de facto trade embargo, disrupting key industries and jobs.
What’s Exempt – For Now?
Electronics and pharmaceutical exports remain untouched for the moment. However, if tensions escalate, they could be next.
Can India Retaliate?
Retaliation is possible but may come with political risks. In 2019, India imposed tariffs on 28 U.S. products, including apples and almonds, in response to U.S. tariffs on steel and aluminum. While many of those tariffs were rolled back in 2023, history shows that India is capable of hitting back.
Still, experts like those at Barclays Research believe retaliation is unlikely but not impossible, especially as both nations seek to avoid a full-blown trade war.
Strategic Realignment?
Some analysts see this as an opportunity for India to rethink its strategic alliances. Modi is set to visit China later this month for the SCO summit, and whispers of reviving India-Russia-China trilateral talks are gaining traction.
Ajay Srivastava of the Global Trade Research Initiative said these developments could even push India closer to Russia and China, undermining Washington’s long-term influence in the region.
Will India Cave or Stand Firm?
Former RBI Governor Urjit Patel voiced concern, calling this a realization of India’s “worst fears.” He urged both sides to move forward with the long-stalled U.S.-India trade talks—especially before the tariffs go live.
The U.S. wants greater access to India’s agriculture and dairy sectors—something India has traditionally resisted to protect local farmers. Whether India offers small concessions or holds its ground will be closely watched.
What’s Next?
With major investments from global tech giants like Apple and Google, India remains a prime “China-plus-one” destination. However, Trump’s tariffs could make countries like Vietnam more attractive in the short term.
India’s government has so far resisted providing direct subsidies to exporters, instead relying on trade financing and promotional schemes. But with this looming tariff shock, experts warn that might not be enough.
Final Word
The next 20 days are crucial. If India bends, it could avoid economic damage but risk political fallout. If it stands firm, it may face a slowdown in trade and GDP. Either way, this is shaping up to be the Modi government’s biggest foreign policy test yet.