Key points
- A 50% combined U.S. tariff on Indian goods is now in effect. Tariffs are expected to impact an estimated $48.2 billion worth of Indian exports to the U.S.
- Labor-intensive sectors, such as textiles, gems, and the automotive industry, are the most severely impacted.
- India’s economic growth may slow due to a decline in exports.
- Certain sectors, including pharmaceuticals and electronics, were granted temporary exemptions.
The United States implemented a significant increase in tariffs on a wide range of Indian products on Wednesday, escalating trade tensions between the two nations. The combined tariffs, totaling 50%, represent a substantial blow to India’s export sector, its largest market.
This move follows an earlier announcement of a 25% tariff and a subsequent executive order adding another 25%, ostensibly in response to India’s purchases of Russian oil.
The Indian government projects the tariffs will affect $48.2 billion in exports, potentially rendering many shipments uncompetitive and impacting India’s robust economic growth.
The new tariffs are expected to impact labor-intensive industries disproportionately. According to the New Delhi-based Global Trade Research Initiative, sectors such as textiles, gems and jewelry, leather goods, food processing, and automobiles are expected to face the most severe consequences.
Ajay Srivastava, founder of the think tank and a former Indian trade official, described the tariff regime as a “strategic shock” that could severely damage India’s established presence in the U.S. market, leading to job losses in export-focused regions and weakening its position in global industrial value chains.
While the situation appears bleak for many Indian export industries, there is some relief to be found. The U.S. has temporarily exempted certain sectors, including pharmaceuticals and electronics, from the additional tariffs.
This partial exemption offers some reprieve to India, considering its substantial investments in these areas. However, the overall impact remains significant and poses a considerable challenge to India’s economic trajectory.
The escalation in trade tensions underscores the fragility of the India-US trade relationship, despite recent growth. Ongoing disputes over market access and domestic political pressures continue to fuel uncertainty.
The long-term consequences of these heightened tariffs remain to be seen. Still, the immediate impact on India’s economy and its workforce is undeniable. The situation highlights the complex interplay of global trade politics and the potential for significant economic repercussions.
