Trump's 50% tariffs threaten Indian goods: Which export sectors could suffer the most | Explained

File Photo - US President Donald Trump shakes hands with India's Prime Minister Narendra Modi during 'Namaste Trump Rally' at Sardar Patel Stadium in Motera, on the outskirts of Ahmedabad, on February 24, 2020. (Photo by Mandel NGAN / AFP)

US President Donald Trump’s aggressive tariff strategy is back in full swing, and this time, India is squarely in his crosshairs. Citing New Delhi’s continued purchases of discounted Russian oil, Trump has slapped a sweeping 50 per cent tariff on Indian exports: the first 25 per cent came into effect today (August 7), while an additional 25 per cent will follow unless a deal is reached within 20 days. The move marks a sharp escalation in trade tensions, threatening to cripple key Indian export sectors including pharmaceuticals, textiles, auto parts, and IT services. The rhetoric is loud, but the consequences could be louder.

India, which exported over $120 billion worth of goods to the US last year, risks losing its competitive edge across sectors that have long thrived under relatively low US duties. As Trump tries to fulfil his promise of bringing jobs and manufacturing “back to America,” Indian exporters could face both regulatory hurdles and sudden cost shocks. The timing couldn’t be worse as the tariff blitz comes amid global slowdown fears and India’s own push to boost exports.

Textiles and apparel

Textiles and apparel are among India’s top exports to the US, worth about $10.3 billion a year. The new tariffs will hit hard, especially on knitted clothes (63.9%), woven garments (60.3%), and home textiles like bedsheets and towels (59%).

Big exporters like Arvind Ltd, Welspun Living, and Trident, which supply US retailers, will face rising costs. American buyers may either raise prices for consumers or shift orders to countries like Vietnam or Bangladesh, where duties are lower. For India’s textile hubs in Tiruppur, Ludhiana, and Panipat, this could mean factory closures and major job losses, especially for small businesses that run on thin profit margins.

Gems and jewellery

India exported nearly $12 billion worth of gems and jewellery to the U.S. last fiscal year. Under the new tariff structure, items like diamonds, gold jewellery, and other ornaments will face effective duties of 52.1%, making them far less attractive in the price-sensitive U.S. retail market.

This sector is highly concentrated in Surat and Mumbai, where hundreds of thousands are employed in cutting, polishing, and designing. According to Colin Shah, MD of Kama Jewelry, several export orders have already been paused as US buyers reconsider sourcing strategies. The sudden rise in costs may also push American retailers toward lab-grown or lower-cost alternatives.

Leather and footwear

Leather and footwear exports, valued at around $1.18 billion, are heavily dependent on the American market. The 25% hike adds to existing duties, raising the overall tariff burden and making Indian shoes, belts, bags, and jackets significantly less competitive.

Exporters in cities like Kanpur, Agra, and Chennai are expected to be the worst hit. Many units are MSME-run and may not have the financial cushion to weather prolonged order suspensions or cancellations. Countries like Vietnam, which benefit from lower tariffs and stronger FTAs with the US, are poised to take India’s share.

Marine products

India’s $2.24 billion seafood exports to the US, especially shrimp, are already burdened with multiple trade barriers like anti-dumping (2.49%) and countervailing duties (5.77%). The new tariff takes the total duty up to 33.26%, making Indian shrimp almost unviable in the US market.

According to Yogesh Gupta of Megaa Moda, Indian exporters are being priced out by competitors like Ecuador, which faces only a 15% tariff. Shrimp farms in Andhra Pradesh and West Bengal are likely to face cutbacks, which could hurt rural incomes and employment in these regions. US importers may switch to alternate sources with more favorable trade terms.

Chemicals and pharmaceuticals

India’s chemical exports to the US, valued at $2.34 billion, now face tariffs of up to 54%, with organic chemicals among the worst hit. This will erode competitiveness, particularly in basic and specialty chemicals where cost is the deciding factor.

Though pharmaceuticals are currently exempt from direct tariffs, the industry is bracing for a major impact with Trump signalling levy to the tune of 250 per cent in the coming days. India exported $9.8 billion worth of pharma products to the US last year. Experts believe US buyers may now demand steeper discounts, cite regulatory technicalities, or switch to alternatives from Europe or Latin America, affecting long-term demand.

This could especially impact India’s formulation manufacturers and generic drug exporters, many of whom depend on large-volume contracts from US hospitals and pharmacy chains.

Engineering goods and machinery

India exports approximately $9 billion worth of engineering goods, machinery, and electrical equipment to the US annually. With the new tariff push, mechanical appliances now face 51.3% duties, making even mid-level equipment unaffordable for American buyers.

Indian firms in Pune, Coimbatore, and Rajkot that manufacture engines, compressors, and electrical systems are expected to lose out to Chinese and European competitors. As margins shrink and volumes decline, some companies may be forced to scale down production or seek new, less lucrative markets.

Furniture and home goods

Furniture, mattresses, and bedding products, many of which are part of India’s emerging export diversification strategy, are now subject to tariffs of 52.3%. While the segment was seeing rapid growth from Indian companies tapping into US housing and hospitality sectors, the tariff walls may shut that door.

Producers in Jodhpur, Saharanpur, and Kerala have invested in design and eco-friendly production lines to meet American standards. However, the high duties could derail future investment plans and cancel existing orders.

Steel, Aluminium and Solar

India’s steel exports to the US stand at $6.2 billion, with aluminium contributing $860 million. While not explicitly targeted in the current tariff list, these sectors may face secondary trade restrictions, including under Section 232 of the US Trade Expansion Act.

Additionally, solar panel exports -- almost entirely US-focused -- are under threat. With firms like Adani Solar, Waaree, and Tata Power Solar banking on the US market, any future tariff hike or shift in trade policy could wipe out revenue projections and stall manufacturing expansion.

Responding to Trump’s steep tariffs on Indian imports, Prime Minister Narendra Modi on Thursday said India will not back down when it comes to protecting its farmers, livestock rearers, and fishermen.

“India will never compromise on the interests of its farmers, livestock rearers, and fishermen brothers and sisters. I know personally that I will have to pay a heavy price for this, but I am prepared for it. India stands firmly with its farmers, and I am ready to face whatever it takes for their welfare," Modi said, reaffirming his government’s commitment to rural communities despite growing global pressure.

India and the US are negotiating a Bilateral Trade Agreement (BTA), aiming to conclude talks by fall of this year. However, negotiations have been in a deadlock over agriculture and dairy, sectors that New Delhi rarely opens up through deals with other nations.

The visit by a US delegation for the next round of trade talks on August 25 is expected to go ahead as planned, government officials told Moneycontrol on August 7.

The sixth round of talks for an initial trade agreement opens August 25 in New Delhi, two days before the 25 percent penalty, which is on top of a 25 percent tariff, for buying Russian oil kicks in.

“The visit of the US team is on schedule, as of now. The talks could stretch to August 27 as well because once negotiations begin, the situation always becomes very dynamic,” one of the officials cited above said. The officials spoke on condition of anonymity.

The Indian negotiators are examining newer sectors, which could be opened to help reduce America’s trade deficit with India, the official said.