India hit with massive 50% US tariffs as exports face economic shock
India is preparing for a significant impact on its economy as 50% tariffs imposed on exports to the US take effect on Wednesday.
The tariffs, announced by US President Donald Trump, were initially set at 25%, but earlier this month he signed an executive order imposing an additional 25% due to India’s purchases of Russian oil.
The total 50% tariff on Indian goods is paid by US customers importing the products, with many companies either ordering less or passing this price increase onto US customers.
The Indian government estimates the tariffs will affect around £36 billion ($48.2 billion) worth of exports.
Officials have warned the new duties could make shipments to the US commercially unviable, triggering job losses and slower economic growth.
India is one of the fastest-growing among major global economies.
Estimates by New Delhi-based think tank, Global Trade Research Initiative, suggest labor-intensive sectors such as textiles, gems and jewelry, leather goods, food, and automobiles will be hit hardest.
“The new tariff regime is a strategic shock that threatens to wipe out India’s long-established presence in the US, causing unemployment in export-driven hubs and weakening its role in the industrial value chain,” said Ajay Srivastava, the think tank’s founder and a former Indian trade official.
The US has so far exempted some sectors, such as pharmaceuticals and electronic goods, from additional tariffs, bringing relief for some large sections of the Indian economy.
Puran Dawar, a leather footwear exporter in northern India’s Agra city, says the industry would take a substantial hit in the near term unless domestic demand strengthens and other overseas markets buy more Indian goods.
“This is an absolute shock,” said Dawar, whose business with the US has grown in recent years. Dawar’s clients include the major fashion retailer Zara.
Dawar, who is also the regional chairman of the Council for Leather Exports, an export promotion body, said the US should understand that the steep tariffs will hurt its own consumers.
Groups representing exporters warn that new import tariffs could hurt India’s small and medium enterprises that are heavily reliant on the American market.
“It’s a tricky situation. Some product lines will simply become unviable overnight,” said Ajay Sahai, director general of the Federation of Indian Export Organisations.
The tariffs come as the US administration continues to push for greater access to India’s agriculture and dairy sectors.
India and the US have held five rounds of negotiations for a bilateral trade agreement, but have yet to reach a deal.
New Delhi has so far resisted opening these sectors to cheaper American imports, citing concerns that would endanger the jobs of millions of Indians who rely on them for their livelihoods.
Prime Minister Narendra Modi has vowed not to yield to the pressure.
“For me, the interests of farmers, small businesses and dairy are topmost. My government will ensure they aren’t impacted,” Modi said at a rally this week in his home state of Gujarat.
He added the world was witnessing a “politics of economic selfishness."
A US delegation canceled plans to visit New Delhi this week for a sixth round of trade talks.
Politics Editor
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