US IMPOSES 50% TARIFFS ON INDIA

Is India really a “Tariff King”?

The US announced the additional 25% tariffs on Indian goods on 6 August 2025, which will come into effect on August 27. It targets India's continued purchase of Russian oil amid geopolitical friction over the Russia-Ukraine war (conflict). This follows an earlier 25% duty implemented on August 1, 2025, bringing the total tariffs up to 50%.  Is India really a “Tariff King”?

Although there was a 21-day buffer period before the implementation of the additional 25% tariff, no strategic negotiation occurred between the two sides. A scheduled visit by U.S. trade representatives to India that was expected to take place between Aug. 25 and Aug. 29 has been called off. Trump has hinted that after he met Putin on Aug 15, the US may not go ahead with additional secondary tariffs on countries that continue to buy Russian crude oil. This might come as a relief for India, as there had been worries that the country could face new penalties if the US enforced secondary sanctions. However, Trump is unpredictable. Modi-Trump likely to meet at the UN General Assembly Meeting in the US in the last week of September. Is there a chance to iron out trade and tariff issues? Scott Bessant hopes that tariff negotiations could be concluded before October. He also noted that Modi is a tough negotiator, and India has not yet yielded on issues regarding market access for agricultural and dairy products, as well as in the energy sector.

50% tariff impact on the Indian economy 

India’s economy is bracing for a hit after the US announced its plan to double tariffs on Indian exports, a move that could push growth down. While the direct export exposure to the US is modest, India's exports to the US in 2024 totaled $87.3 billion, accounting for 18% of its total exports and sharing 2.2% of its GDP. Morgan Stanley estimates that if US tariffs (50%) on Indian goods persist for a year, India's economic growth could be impacted by 0.4-0.8%. The higher trade barriers are expected to ripple through sectors where the US is a dominant market, including Textiles & Apparel, Precious stones, Pharmaceuticals, Mechanical appliances and parts, Chemicals, Textiles, Vehicles, and parts, etc.

A 50% tariff could lose the competitiveness of these exports, reduce profit margins, and increase unemployment. According to India's Ministry of Commerce and Industry, if an additional 25% tariff were imposed and sustained for six months, India's exports to the US could be reduced by 31%, resulting in an additional 2 million people being unemployed.

The Federation of Indian Export Organizations estimates that the additional 50% tariffs would affect $37 billion worth of goods, resulting in a significant cost surge and a 8%-12 % reduction in profit margins.

India's Strategic Response to US Tariffs and Diplomatic Outreach

Regarding the US's 50% tariff imposition on India, India is pursuing a multi-faceted strategy focused on long-term resilience rather than immediate retaliation. Key elements include protecting domestic agriculture, implementing fiscal measures (tax reductions, direct subsidies, etc.), export market diversification to reduce dependence on the US market and promoting self-reliance across various sectors

Recent trade friction has reinforced India's commitment to strategic autonomy. This is manifesting in enhanced diplomatic engagement. Indian Foreign Minister will visit Russia (August 20-21) for discussions encompassing bilateral cooperation and pressing international issues.  Modi will visit China (August 31 - September 1) to attend the Shanghai Cooperation Organization (SCO) Summit – his first visit in over seven years. This visit signifies a potential recalibration of the relationship. But like many relationships, it is complex.

Spring and summer 2026 orders are being placed right now; it’s challenging to do business in such a tariff environment.  The longer the uncertainty drags on, buyers will start to shift their supply chains out of India. If you need a supply chain consultant or diversification in Southeast Asia, please contact us at jcroning@cca-im.com. Or visit our website www.cca-im.com, and contact us via the contact tab.