Trump hits India with 50% tariffs, threatening trade and jobs

In a move that threatens to upend decades of US-India economic engagement, President Donald Trump has imposed a 50% tariff on select Indian goods, the highest rate applied to any Asian nation.

The new levies, effective on August 27 at 12:01 a.m. Washington time, double the existing 25% tariff on Indian exports and target New Delhi’s continued purchases of Russian oil, which Trump claims fund Vladimir Putin’s war in Ukraine, according to Bloomberg.

India has dismissed the move as “unfair, unjustified and unreasonable.”

The tariffs put India, the world’s fastest-growing major economy, at risk of a sharp decline in trade with its largest export market. They could undermine the country’s global competitiveness against rivals such as China and Vietnam, while posing challenges to Prime Minister Narendra Modi’s goal of transforming India into a manufacturing hub.

“This is a strategic shock that threatens India’s foothold in US labour-intensive markets, risks mass unemployment in export hubs, and could weaken participation in global value chains,” said Ajay Srivastava of the Global Trade Research Initiative.

Some sectors are exempt. Electronics exports, including Apple Inc.’s recent investments in India, and pharmaceuticals remain untouched. Nevertheless, the tariffs have stunned Indian officials, who have spent months negotiating with Washington amid frustration over US concerns about India’s high tariffs on agriculture and dairy.

Trade tensions intensified after Trump criticised India’s Russian oil purchases. New Delhi has defended its strategy, noting the need to stabilise energy markets and stating it will continue importing Russian oil depending on financial considerations. India now accounts for roughly 37% of Russia’s oil exports, with plans to increase annual trade with Moscow to $100 billion over the next five years.

The tariffs coincide with a shift in India’s geopolitical posture. New Delhi is strengthening ties with BRICS members and repairing relations with China following the 2020 border clashes, with Modi scheduled to meet President Xi Jinping next week. Meanwhile, US trade negotiations have stalled, with a scheduled trade team visit postponed, casting doubt on the possibility of a deal before fall.

Economically, the 50% tariffs may slow India’s GDP growth by 0.6–0.8 percentage points, according to Citigroup. However, private consumption — comprising about 60% of India’s GDP — may cushion the impact, as US imports represent roughly 2% of total output. Still, Indian markets have reacted nervously: the rupee is Asia’s worst-performing currency this year, and foreign portfolio outflows have reached nearly $5 billion since July.

To mitigate the impact, Modi’s government is implementing “next-generation reforms,” including a major consumption tax overhaul and targeted support for textile and footwear sectors most exposed to higher tariffs. Economists suggest the crisis could accelerate overdue structural reforms in land, labor, and liberalization to strengthen India’s competitiveness.

By Tamilla Hasanova