Indian exporters are raising alarms after US President Donald Trump announced a steep increase in tariffs on Indian goods, escalating trade tensions over New Delhi’s continued imports of discounted Russian oil a key source of funding for Moscow amid the Ukraine war.
The U.S. had already imposed a 25% tariff on select Indian exports earlier this week. On Wednesday, Trump signed an executive order doubling that to 50%, with the new rate set to take effect in three weeks.
India, the world’s second-largest buyer of Russian crude, has reaped economic gains from lower oil prices but its stance has drawn growing criticism from Western allies enforcing sanctions on Russia.
India’s Ministry of External Affairs condemned the tariff hike as “unfair, unjustified, and unreasonable.”
S.C. Ralhan, President of the Federation of Indian Export Organisations (FIEO), warned the decision would have sweeping consequences.
“This is a major blow to Indian exports. Nearly 55% of our shipments to the U.S. will be impacted,” Ralhan said.
“With a 50% tariff, we face a 30–35% cost disadvantage compared to competitors. Many orders are already being canceled.”
Ralhan also noted that small and medium-sized enterprises, already operating on tight margins, are particularly vulnerable.
“For many of them, absorbing such costs simply isn’t possible,” he added.
The U.S. remains India’s top trading partner, with bilateral trade reaching $87.4 billion in 2024. The tariff hike could significantly strain this vital economic relationship.
Shilan Shah, Senior Economist at Capital Economics, shared a similar outlook, noting that U.S. consumer demand accounts for about 2.5% of India’s GDP.
“If these tariffs stay, India’s export competitiveness will suffer. We may see GDP growth dip to 6% this year and next down from our current 7% forecast,” Shah warned.
As the world’s most populous country and fifth-largest economy, India now faces a difficult balancing act securing affordable energy while preserving critical trade ties.
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