August 8, 2025
NEW DELHI – US President Donald Trump’s doubling of tariffs on India would deal a severe blow to the country’s exporters, denting growth in the world’s fourth-largest economy and putting jobs in labour-intensive sectors at risk.
The first tranche of 25 per cent tariffs kicked in at midnight on Aug 7 (Eastern Standard Time).
But Mr Trump on Aug 6 imposed an additional 25 per cent on India over its purchase of Russian oil, to come into effect within 21 days.
“They don’t care how many people in Ukraine are being killed by the Russian war machine,” he wrote on his Truth Social platform on Aug 4.
Mr Trump’s latest executive order marked yet another escalation in a feud with a key Asian partner, which could reverse decades of strategic courtship by his predecessors to counter China’s influence in the Indo-Pacific. It would also hurt India’s ambitions to more than double its exports from US$437.4 billion (S$562 billion) in 2024 to US$1 trillion by 2030.
“Given that there is a 21-day cooling period before the 50 per cent tariff kicks in, we expect some negotiation to take place to lower these rates,” Ms Sonal Badhan, an economist with Bank of Baroda, told The Straits Times.
“For now, domestic fundamentals remain strong, and India being a consumption-oriented economy rather than an export-oriented economy will work in its favour,” she added, referring to how most businesses in India cater to the domestic market. As it stands, Bank of Baroda estimates 25 per cent tariffs on India’s exports to the US may take 0.2 percentage point off its growth forecast for the Indian economy to 6.4 per cent in 2025.
Ms Radhika Rao, senior economist and executive director at DBS Bank in Singapore, noted that the three-week deadline “leaves the door open for negotiations and reduction in the final rate”.
She noted that there could be further trade deal negotiations between India and the US, and scope for US-Russia discussions over the Ukraine war.
Economic consequences
The additional tariffs mean India may potentially join Brazil as the countries facing 50 per cent tariffs.
For now, mobile phones, which make up the bulk of electronics exports, and pharmaceutical products, which together account for over 30 per cent of India’s total exports to the US of US$86.51 billion in 2024, are protected due to earlier exemptions from the Trump administration.
But the tariffs would severely disadvantage India against major competitors in manufacturing and textiles in neighbouring Bangladesh and other countries in South-east Asia.
“When the first tariffs came at 25 per cent, we were 5 per cent above competing countries like Vietnam, Cambodia and Indonesia,” Mr M. Rafeeque Ahmed, the chairman of Farida Group, an India-based exporter of leather footwear, told ST.
He was referring to the 20 per cent tariffs on Vietnam’s exports to the US, and the 19 per cent levy imposed on Cambodian and Indonesian exports.
“Our customers said, ‘How can we pay you more?’ So we gave them a discount of 5 per cent. We had to do it to retain customers,” said Mr Ahmed, whose company’s exports are split almost equally between Europe and the US.
“The new (Russia) sanctions will discourage customers from coming to India. The uncertainty means they can switch within one week. Why should they wait for three weeks? There is no confusion over tariffs in Vietnam, Cambodia or Indonesia.”
Apart from leather, exporters of chemicals, footwear, gems and jewellery, textiles and shrimp are among those with the largest exposure to the US market, and are likely to keenly feel the impact of a 50 per cent tariff hike.
For many of these labour-intensive sectors, loss of export revenue would likely translate into job losses. The Indian textile industry, for instance, employs over 45 million people, making it a leading source of employment.
Mr Sudhir Sekhri, chairman of the Apparel Export Promotion Council, warned that 50 per cent tariffs on India’s exports to the US would be a “death knell” for the micro and medium apparel industry.
“There is no way the industry can absorb this,” he said.
A third of India’s garment exports went to the US in 2024.
Mr Ahmed does not see diversifying beyond the US, which is the largest consumer market in the world, as a feasible option, given that it would take beyond a year to look for new markets.
Tariff negotiations
In announcing the first 25 per cent tariff on India, Mr Trump on July 30 slammed the South Asian country’s “obnoxious” trade barriers. Much of his frustration stems from India’s refusal to open its market to US agriculture and dairy imports. These two sectors are a lifeline for more than 60 per cent of India’s population. Farmer groups have opposed the entry of American produce, saying they would not be able to compete.
“Farmers’ interest is our top priority. India will not bow to pressure or compromise the welfare of its farmers, fishermen or dairy farmers,” Indian Prime Minister Narendra Modi said on Aug 7, repeating the stand he had made before. “If I have to pay a price for this, I am ready.”
Farmers wield enormous political clout, with Mr Modi facing state-level elections.
India and the US are due for more negotiations later in August. Hope for exporters hinges on whether India can negotiate away the forthcoming penalty tariffs for buying Russian oil. Around 36 per cent of India’s total crude oil imports were from Russia in 2024.
Even as Mr Trump’s evident ire over India-Russia relations grows, Indian National Security Adviser Ajit Doval is in Russia for talks on security and energy. Mr Doval on Aug 7 also announced that Russian President Vladimir Putin would visit India later in the year for the India-Russia summit.
The Indian government has not indicated that it would stop buying oil from Russia, a country with which it has longstanding ties.
“Pressure is now mounting on India to come to a trade agreement,” Ms Teresa John, deputy head of research and lead economist at Nirmal Bang, a stockbroking company, told ST.
“While India may still be wary of opening up its agriculture sector, India could agree to reduce dependence on Russian oil and defence in a phased manner and diversify to other sources,” said Ms John.
“Notably, there will be pressure to import more of both oil and defence equipment from the US.”