On Wednesday, President Donald Trump implemented a hefty 50% tariff on various Indian goods. This move is expected to shake up trade worth billions and could jeopardize numerous jobs in India, the world’s most populous country.
The U.S. initially introduced a 25% tariff on India back in July, which was quickly followed by another 25%, primarily because of India’s continued purchases of Russian oil. Now, this new rate applies to a wide range of products, including gems, jewellery, garments, footwear, and industrial chemicals. Analysts warn that this steep tariff could severely hinder India’s export competitiveness, especially against China, complicating Prime Minister Narendra Modi’s ambitions to boost manufacturing in India.
### Sectors Facing the Brunt
According to the Global Trade Research Initiative (GTRI), Indian exports to the U.S. might plummet from $86.5 billion this year to around $50 billion by 2026 due to these tariffs. They predict that textiles, gems, jewellery, shrimp, and carpets will suffer the most, potentially facing a 70% drop in exports. MK Venu, a seasoned journalist, emphasized the critical nature of these sectors, which rely heavily on labor and small companies.
He noted that smaller firms might struggle to survive under these tariffs and could find themselves losing business to countries like Vietnam and Bangladesh.
### Are Any Industries Exempt?
Interestingly, the Indian pharmaceutical sector has been granted exemption from immediate tariff increases. This is significant because India supplies nearly half of the generic drugs that the U.S. imports. In 2024, these exports were valued at around $8.7 billion.
Other sectors, including semiconductors, consumer electronics, aluminium, steel, and passenger vehicles, will face separate tariff regulations.
### India’s Response to the Tariff Hike
In light of these challenges, Prime Minister Modi has promised to safeguard farmers and promote self-reliance in the economy. During a recent speech, he urged India to embrace self-sufficiency as a matter of pride, not desperation.
Faisal Ahmed, a professor of geopolitics, highlighted that Modi’s push for self-reliance wasn’t a new initiative but rather a continuation of policies started during the pandemic. While the government is talking about support and subsidies, experts like Venu express skepticism over the implementation specifics and funding.
As India grapples with the impact of these tariffs, policymakers might reconsider their heavy dependence on the U.S. market. Reports suggest that India is exploring multilateral trade agreements, which it had previously shunned. The country is also negotiating a trade deal with the European Union for a potential resolution.
### Economic Impact
Economists estimate that these tariffs could shave off about 1% from India’s GDP—equating to approximately $36 billion. Earlier this year, the International Monetary Fund projected growth of 6.4% for India in 2026, but these tariffs could alter that trajectory.
### Reasons Behind the Tariffs
The tensions stemmed from unfruitful trade talks aimed at diffusing a potential trade war. India’s purchase of Russian oil was a sticking point during negotiations. This year, India’s imports of Russian oil surged to 37%, escalating accusations from U.S. officials that India was indirectly supporting Russia amid the conflict in Ukraine.
Despite the backlash, India maintained that its oil imports were driven by market demands and the energy needs of its large population. Moreover, Indian officials pointed out that the U.S. seemed to be selectively targeting India while letting other countries continue their imports from Russia.
Trump’s tariffs have prompted India to strengthen ties with countries like China, which has become a vital trading partner. The geopolitical dynamics are changing, and many experts believe trust between India and the U.S. has reached a historic low.
In conclusion, as India faces these tariffs head-on, it must navigate a complex landscape of economic challenges and geopolitical tensions. The response from small businesses, policymakers, and the general public will be crucial in shaping India’s economic future.
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Economy, News, Donald Trump, International Trade, Narendra Modi, Oil and Gas, Politics, Trade War, India, United States
