Impact of Trump's 50% Tariff on Indian Exports: Key Sectors Affected
Economic Consequences of US Tariffs on India
The recent decision by prominent US retailers such as Amazon, Walmart, Target, and Gap to halt new orders from India comes in response to President Donald Trump's implementation of a 50% tariff on Indian imports. This tariff increase is poised to significantly affect India's economy, as the US is its largest export market. Approximately 55% of Indian exports to the US could be impacted, with projections indicating a potential decline of 40-50% in orders destined for the US, resulting in an estimated loss of $4-5 billion in export revenue.
Exporters Facing Challenges
Indian exporters have begun receiving notifications from US buyers urging them to pause shipments of apparel and textiles until further notice. Buyers have explicitly stated their unwillingness to absorb the additional costs associated with the tariffs. Major companies such as Welspun Living, Gokaldas Exports, Indo Count, and Trident derive between 40% to 70% of their sales from the US market.
Sectors Most Affected
The textiles and apparel sector is currently facing the brunt of these tariffs, accounting for 28% of India's total exports to the US, valued at $36.61 billion for the fiscal year ending March 2025. With the US representing a significant portion of India's textile exports, there are concerns that orders may shift to competitors like Bangladesh and Vietnam, which are subject to a lower tariff of 20%. Other impacted sectors include gems and jewellery, contributing $10 billion annually, auto parts worth $7 billion, leather goods, and marine products, many of which are produced by Micro, Small, and Medium Enterprises (MSMEs).
Details of Trump's Tariff Policy
President Trump has enacted a 50% tariff on Indian goods, with an initial 25% taking effect immediately and an additional 25% set to be implemented on August 28. This measure is a response to India's ongoing purchase of oil from Russia. In an executive order, Trump stated, "I determine that it is necessary and appropriate to impose an additional ad valorem duty on imports of articles of India, which is directly or indirectly importing Russian Federation oil."
India's Response to Tariffs
India has condemned these tariffs as "unfair, unjustified, and unreasonable." The Ministry of External Affairs emphasized that India's oil imports from Russia are based on market dynamics and are aimed at ensuring energy security for its 1.4 billion citizens.