U.S. Tariffs on Indian Exports

The U.S. imposed 50% tariffs on imports from India effective August 27, 2025, severely impacting labour-intensive sectors like textiles, shrimp, jewellery, and carpets.

Understanding the Scale and Impact of U.S. Tariffs on India’s Export Economy

Background of Tariffs

• Tariffs are import duties levied by a country to protect its domestic industries.
• Earlier, Indian exports faced lower duties (2–13% in many sectors).
• The recent hike raised effective tariffs to 50–65% on several Indian goods.
• Affected sectors are critical for employment and foreign exchange earnings.

Sectors Severely Impacted

• Marine Exports (Shrimp)
  • U.S. imports from India (2024-25): $2.4 billion (32.4% of India’s total shrimp exports).
  • Tariffs increased from 10% to 60%, leading to price collapse (20% fall in Andhra Pradesh).
• Gems and Jewellery
  • U.S. imports: $10 billion (40% of sectoral exports).
  • Tariffs increased from 1% to 52.1%.
• Surat’s diamond industry (12 lakh jobs) already reporting production cuts.
• Textiles and Apparel
  • U.S. imports: $10.8 billion (35% of Indian apparel exports).
  • Tariffs increased from 9% to 63.9%.
  • Impact on clusters: Tiruppur, Noida-Gurugram, Ludhiana, and Bengaluru.
• Carpets and Handicrafts
• Carpets:$1.2 billion exports; 6% share with U.S.
• Tariffs increased from 9% to 52.9%.

Sectors with Moderate Impact

• Chemicals: $2.7 billion exports; tariffs now 54% (from 4%).
• Metals: $4.7 billion exports; 17% share of total exports.
• Machinery and Appliances: $6.7 billion exports; 20% share.
• SMEs in Delhi-NCR, eastern foundry hubs likely to face major stress.

Implications for Indian Economy

• Employment Impact: Millions of workers in textiles, jewellery, and shrimp sectors at risk.
• Export Diversification Challenge: Heavy reliance on the U.S. (top market for many goods).
• Current Account Pressure: Export slowdown may widen trade deficit.
• SME Distress: Working capital issues for small and medium exporters.
• Regional Effects: Shrimp (Andhra Pradesh), Diamonds (Gujarat), Textiles (Tamil Nadu, Punjab, Karnataka), Carpets (U.P., Rajasthan).

Government Response

• Short-term: Multi-ministry plan for sectoral support.
• Medium-term: Export destination diversification, leveraging FTAs (e.g., UAE, EU, Australia).
• Long-term: Promote ‘Vocal for Local’, strengthen domestic consumption base.
• RBI’s readiness to provide liquidity support for exporters.

Way Forward

• Export Market Diversification: Reduce over-reliance on U.S.; target EU, ASEAN, Africa, Middle East.
• FTA Utilisation: Maximise benefits from India-UAE CEPA, India-Australia ECTA.
• Sectoral Support: Subsidies, credit easing, skill upgradation in labour-intensive industries.
• WTO Mechanisms: India may contest U.S. tariff hikes under WTO dispute resolution.
• Industrial Upgradation: Invest in value addition, branding, and quality compliance to withstand global competition.
• Domestic Consumption Push: Strengthen internal demand through schemes like PM MITRA Parks, PLI for textiles, MSME incentives.