Indian exporters are preparing for significant disruption after Washington confirmed an additional 25 per cent tariff on all Indian-origin goods entering the United States from Wednesday, potentially taking total duties on some shipments to as high as 50 per cent.
The measure follows President Donald Trump’s decision to tighten trade pressure on New Delhi over its increased purchases of Russian crude.
A notice from the US Department of Homeland Security states the new duties will apply to goods “entered for consumption” or “withdrawn from warehouse for consumption” from 12.01am Eastern Daylight Time on Wednesday, equivalent to 09.31 Indian Standard Time. The step immediately hit Indian markets on Tuesday: the rupee weakened 0.2 per cent to 87.75 to the US dollar, while the Nifty 50 and Sensex benchmarks were each about 0.7 per cent lower in early trade.
White House trade adviser Peter Navarro and US Treasury Secretary Scott Bessent have accused India of indirectly supporting Russia’s war effort by sharply increasing purchases of Russian oil. Mr Bessent said earlier this month that India was “profiteering” from discounted Russian crude. Russian supply is now estimated to account for about 42 per cent of India’s total oil imports, up from under 1 per cent before the full-scale invasion of Ukraine, a shift Washington has described as unacceptable.
India’s Commerce Ministry did not immediately respond to requests for comment on the tariff notification. An official at the ministry, speaking on condition of anonymity, said the Government had “no hope for any immediate relief or delay” and was preparing financial assistance for affected exporters while encouraging diversification towards alternative markets, including China, Latin America and the Middle East. According to the official, nearly 50 countries have been identified for targeted promotion of Indian exports, with a focus on textiles, processed foods, leather goods and marine products.
Exporter groups warn the higher duties could affect more than half of India’s merchandise shipments to the United States. Of India’s roughly $87bn in goods exports to its largest single market, industry bodies estimate that as much as 55 per cent could be exposed. Competitors such as Vietnam, Bangladesh and China are seen as likely beneficiaries if US buyers re-source orders.
“The US customers have already stopped new orders,” said Pankaj Chadha, president of the Engineering Exports Promotion Council. “With these additional tariffs, exports could come down by 20–30 per cent from September.” Mr Chadha said the Government had promised enhanced subsidies on bank loans and support for market diversification should firms incur losses, but he cautioned that exporters saw “limited scope” to redirect volumes quickly either to new overseas destinations or into India’s domestic market.
India’s diamond industry, already under strain amid weak Chinese demand, faces a particular risk. The United States is the top buyer for cut and polished stones; it accounts for nearly a third of India’s annual $28.5bn in gem and jewellery shipments. Higher tariffs could curb access to that market further, compounding a slide that has taken exports to a two-decade low.
Private-sector analysts warned that a sustained tariff rate of up to 50 per cent on a broad set of Indian goods would weigh on corporate earnings and growth. Capital Economics has estimated the drag from the full US measures at about 0.8 percentage points to India’s GDP growth both this year and next, even if proposed domestic tax reductions offset part of the impact. Equity strategists said earnings downgrades could be among the steepest in Asia should the tariffs remain in force for several quarters.
On the diplomatic track, External Affairs Minister Subrahmanyam Jaishankar said last week that talks with Washington were ongoing. He also argued that US concerns about Russian oil flows were not being applied evenly to other large buyers, including China and members of the European Union. India has not issued any directive to state-owned or private refiners to alter crude sourcing, and refining executives said purchases would continue to be determined by commercial terms.
Until recently, officials in New Delhi had expressed confidence that a negotiated settlement with Washington could limit any additional duties to a ceiling of about 15 per cent. After five rounds of trade discussions, however, people on both sides cited a mix of political misjudgment, missed signals and growing ill-feeling for the breakdown in talks. Bilateral trade in goods between the world’s largest and fifth-largest economies is valued at more than $190bn.
Domestically, Prime Minister Narendra Modi has said his Government will not compromise the interests of Indian farmers, even at significant cost, a stance that has shaped recent trade policy choices. Mr Modi is also seeking to stabilise relations with Beijing, with his first visit to China in seven years planned for the end of the month.
For Indian exporters, the immediate task is to assess contract exposures, renegotiate terms where possible, and determine which products can be rerouted to other markets without steep discounts. For policymakers, the priority will be to cushion cash-flow strains in labour-intensive sectors while mapping out longer-term adjustments to supply chains if the US tariffs prove durable.
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