A significant trade dispute has erupted between India and the United States, as the U.S. government officially imposed a 50% tariff on a broad range of Indian goods, effective today. The move, which doubles an existing 25% duty, is a direct response to India's continued purchases of discounted Russian oil and defence equipment. This sharp escalation threatens to severely disrupt bilateral trade, impacting key Indian export sectors and raising concerns about global economic stability.
India-US Trade Tensions Escalate as US Imposes 50% Tariffs
According to a notification from the U.S. Department of Homeland Security, the new tariffs apply to products "entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 am EDT on August 27, 2025." White House officials, including Treasury Secretary Scott Bessent, have accused India of indirectly funding Russia's war in Ukraine, citing a dramatic increase in Russian oil imports to India.
The tariffs are a major blow to India, with the Global Trade Research Initiative (GTRI) estimating that approximately two-thirds of India's $86.5 billion in annual goods exports to the U.S. will now face the steep 50% levy. Labour-intensive sectors such as textiles, apparel, gems, jewellery, seafood, and leather goods are expected to be the hardest hit. Industry experts warn that exports in these sectors could plummet by as much as 70%, putting hundreds of thousands of jobs at risk across India's export hubs.
In a public address, Indian Prime Minister Narendra Modi described the current global trade climate as one of "economic selfishness," reaffirming India's commitment to safeguarding its national interests, particularly those of its farmers, cattle rearers, and small-scale industries. The Indian government has ruled out retaliatory tariffs but is reportedly preparing a multi-pronged strategy to cushion the blow, including financial assistance for affected exporters, a renewed focus on domestic consumption, and efforts to diversify into new markets in Asia, Latin America, and the Middle East.
Bilateral trade talks, which were already in a stalemate, have been further complicated by the U.S. move. A U.S. delegation's scheduled visit to New Delhi for a new round of trade negotiations was postponed indefinitely. This comes after earlier negotiations for a bilateral trade agreement broke down due to India's refusal to grant the U.S. greater access to its agriculture and dairy markets.
While some sectors, such as pharmaceuticals and electronic goods, are currently exempt from the additional tariffs, the overall outlook for India-U.S. trade relations remains uncertain. The escalation poses a significant challenge for both countries, highlighting a growing disconnect between their strategic partnership and their economic interests.