U.S. Tariffs on Indian Goods: A New Challenge for Trade Relations

NEW DELHI (AP) — Steep tariffs imposed by the United States on a wide array of Indian products went into effect on Wednesday, presenting a significant threat to India’s overseas trade in its largest export market.

Initially, President Donald Trump announced a 25% tariff on Indian goods. However, earlier this month, he signed an executive order that introduced an additional 25% tariff, primarily due to India’s purchases of Russian oil. This brings the total imposed tariffs by the U.S. on India to a staggering 50%.

The Indian government estimates that these tariffs will significantly affect exports worth approximately $48.2 billion. Officials have cautioned that the increased duties could render shipments to the U.S. commercially unviable, potentially resulting in job losses and stunted economic growth.

Impact on Key Sectors

According to estimates from the New Delhi-based think tank Global Trade Research Initiative, labor-intensive sectors such as textiles, gems and jewelry, leather goods, food, and automobiles are expected to bear the brunt of these tariffs.

“This new tariff regime poses a strategic shock that threatens to obliterate India’s long-established presence in the U.S. market, leading to unemployment in export-driven regions and undermining its role in the global industrial value chain,” remarked Ajay Srivastava, the founder of the think tank and a former Indian trade official.

While the U.S. has temporarily exempted some sectors—including pharmaceuticals and electronic goods—there remains a significant risk for India, as its stakes in these unaffected sectors are considerable.

Exporters Voice Concerns

Puran Dawar, a leather footwear exporter based in Agra, expressed deep concerns regarding the impending impact on his industry. He emphasized that unless domestic demand improves and alternative markets increase their imports, the future looks bleak.

“This is an absolute shock,” stated Dawar, whose clientele includes renowned fashion retailer Zara. He currently holds a position as the regional chairman of the Council for Leather Exports, an export promotion body. Dawar urged U.S. policymakers to realize that steep tariffs will ultimately harm American consumers as well.

Leading exporter associations have warned that these new tariffs could pose grave risks to India’s small and medium enterprises, many of which are heavily reliant on the American market.

“It’s a tricky situation. Certain product lines could become unviable overnight,” asserted Ajay Sahai, director general of the Federation of Indian Export Organizations.

Modi’s Stance on U.S. Pressure

The tariffs are rolled out amid ongoing U.S. pressure for increased access to India’s agriculture and dairy sectors. India and the U.S. have engaged in five rounds of negotiations for a bilateral trade agreement; however, an accord remains elusive. New Delhi is cautious about opening its agricultural markets to cheaper American imports, citing potential job losses for millions of Indian citizens.

Prime Minister Narendra Modi has highlighted his commitment to safeguarding the interests of Indian farmers and businesses. “My government will ensure they aren’t impacted,” he declared at a rally in Gujarat this week, while also condemning the “politics of economic selfishness” demonstrated by other nations.

This week, a planned U.S. delegation visit to New Delhi for further trade discussions has been abruptly canceled, signaling further complications in the trade relationship.

Strategic Local Reforms to Mitigate Impact

In response to the escalating tariff situation, the Indian government has begun implementing reforms aimed at boosting domestic consumption and insulating the economy from external shocks.

Recent moves include adjustments to the goods and services tax (GST), which would lower costs for items like insurance, vehicles, and appliances in anticipation of increased consumer spending during the upcoming Hindu festival of Diwali.

The government council is set to meet next month to evaluate potential tax cuts, while discussions are underway between the Trade Ministry and Finance Ministry regarding financial incentives, including favorable loan rates for exporters.

Additionally, the Trade Ministry is exploring opportunities to diversify exports towards other regions, such as Latin America, Africa, and Southeast Asia. Ongoing trade negotiations with the European Union may gain renewed urgency as India endeavors to lessen its reliance on the U.S. market.