The imposition of 50% tariffs by the United States on Indian imports from August 27, 2025, has affected India’s export economy. Labour-intensive sectors with high export volumes to the U.S. are experiencing sharp declines in demand. The Government of India is actively planning measures to support these sectors in the short term while pushing for export diversification in the long term.
Key Metrics to Assess Tariff Impact
The severity of tariff impact on Indian sectors depends on three factors. First, the absolute export value to the U.S. Second, the proportion of U.S. exports in the sector’s total exports. Third, the tariff rate imposed. Sectors with large exports to the U.S., high U.S. export shares, and steep tariffs face the greatest challenges. Conversely, sectors with low U.S. market dependence are less affected.
Severely Affected Sectors
Shrimp exports, valued at $2.4 billion, constitute 32.4% of India’s total shrimp exports. Tariffs now total 60%, up from 10%. Andhra Pradesh, the main shrimp producer, has seen prices drop by 20% after earlier tariffs. Further declines are expected. The diamond, gold, and jewellery sector exported $10 billion to the U.S., making up 40% of total exports. Tariffs surged from 2.1% to 52.1%. Surat, a key hub employing around 1.2 million workers, has started production cuts. Textiles and apparel exports to the U.S. reached $10.8 billion, with apparel alone at $5.4 billion. The U.S. accounts for 35% of apparel exports. Tariffs jumped from 13.9% to 63.9%. Exporters in Tiruppur, Noida-Gurugram, Ludhiana, and Bengaluru report shipment rushes, cancelled orders, capacity freezes, and potential job cuts. Carpet exports to the U.S. totalled $1.2 billion, representing 58.6% of total carpet exports. Tariffs rose from 2.9% to 52.9%. Other hit sectors include handicrafts, leather goods, furniture, and agricultural products like basmati rice and spices.
Moderately Affected Sectors
Organic chemicals exports to the U.S. were $2.7 billion, accounting for 13.2% of total exports. Tariffs increased from 4% to 54%. Industry bodies have sought government intervention. Steel, aluminium, and copper exports to the U.S. stood at $4.7 billion or 17% of total exports. The U.S. market is vital for small and medium enterprises in Delhi-NCR and eastern foundry hubs. Tariffs threaten jobs and export stability. Machinery and mechanical appliances exports to the U.S. amounted to $6.7 billion, 20% of total exports. Demand is expected to decline due to tariffs.
Government Response and Future Plans
Prime Minister Narendra Modi and Commerce Minister Piyush Goyal have emphasised the ‘swadeshi’ movement urging greater domestic consumption. The government is devising a multi-ministry strategy to mitigate short-term exporter losses. Medium and long-term plans focus on diversifying export destinations and leveraging free trade agreements. The Reserve Bank of India has pledged financial support to affected exporters. Collaborative efforts with industry bodies aim to stabilise and grow exports beyond the U.S. market.
Questions for UPSC:
- Taking example of the recent US tariffs on Indian exports, analyse the impact of trade barriers on developing economies and their export sectors.
- Examine the role of government policies in supporting export-oriented industries during global trade disruptions. Discuss in the light of India’s recent experience with US tariffs.
- What is the significance of export diversification for emerging economies? How can free trade agreements aid in reducing dependency on single markets?
- Critically discuss the ‘Make in India’ and ‘Go Vocal for Local’ initiatives in the context of global trade tensions and their impact on India’s industrial growth.
