US Slams 50% Tariff on Indian Goods Amidst Oil Dispute

Key export sectors face severe disruption as trade tensions escalate

India’s vital export industries, including textiles, leather, and jewelry, are bracing for a significant blow following the United States’ imposition of a 50% tariff on a range of goods. The move, directly targeting India’s continued purchases of Russian oil, could slash India’s exports to the US by up to half, according to industry analysts.

Sectors in Peril

The sweeping tariffs will critically impact sectors such as organic chemicals, carpets, apparel, textiles, diamonds, gold products, machinery, and furniture. Experts predict that these new duties will render Indian products considerably more expensive in the American market.

The additional 25% tariff, raising the total to 50%, will be implemented in two phases. An initial 25% duty takes effect on August 7, with a further 25% to be applied from August 27, compounding the existing import duties.

Industry think tank GTRI estimates that organic chemical exports alone could face an additional 54% duty. Other severely affected categories include knitted apparel at 63.9%, woven apparel at 60.3%, and textiles and made-ups at 59%.

Shrimp and Textiles Hit Hardest

The seafood export sector is already feeling the strain. Yogesh Gupta, MD of Megaa Moda, noted that Indian shrimp will become uncompetitive. “Indian shrimp already attracts a 2.49% anti-dumping duty and a 5.77% countervailing duty. After this 25%, the duty will be 33.26% from August 7,” he stated, highlighting the significant disadvantage compared to competitors like Ecuador, which faces only a 15% tariff.

The Confederation of Indian Textile Industry (CITI) expressed deep concern. “The US tariff announcement of August 6 is a huge setback for India’s textile and apparel exporters as it has further complicated the challenging situation we were already grappling with and will significantly weaken our ability to compete effectively vis-à-vis many other countries for a larger share of the US market,” CITI reported. The US is India’s largest market for these exports.

Jewelry and Manufacturing Face Competitive Disadvantage

Colin Shah, MD of Kama Jewelry, warned that the measures could severely impact Indian exports, with roughly half of all shipments to the US market directly affected. He explained that the 50% reciprocal tariff effectively places Indian exporters at a 30-35% competitive disadvantage compared to peers from countries with lower tariffs.

“Many export orders have already been put on hold as buyers reassess sourcing decisions in light of higher landed costs. For a large number of MSME-led sectors, absorbing this sudden cost escalation is simply not viable. Margins are already thin, and this additional blow could force exporters to lose long-standing clients.”

—Colin Shah, MD, Kama Jewelry

The United States’ total bilateral trade with India reached USD 131.8 billion in 2024-25, with India exporting USD 86.5 billion and importing USD 45.3 billion. The new tariffs are poised to disrupt this significant trade relationship, potentially impacting sectors valued at billions of dollars, including textiles/clothing (USD 10.3 billion), gems and jewellery (USD 12 billion), and chemicals (USD 2.34 billion).

Industry leaders are urging the government to intervene and explore new markets. Exporters are hopeful that an expedited India-US bilateral trade agreement could offer some relief, though sensitive areas like agriculture and dairy remain sticking points in ongoing negotiations. The current phase of discussions aims for a trade pact by autumn.

This trade action by the US is particularly notable as only India, among major buyers of Russian oil such as China and Turkey, has faced such punitive measures. The impact on India’s economy, especially its labor-intensive export sectors, is expected to be substantial, potentially leading to job losses and reduced manufacturing output.