Trump’s 50% Tariff on Indian Imports Takes Effect, Escalating Trade Tensions

Agencies (with inputs from Reuters) August 27, 2025 : U.S. President Donald Trump’s decision to double tariffs on goods from India to as much as 50 percent took effect on Wednesday, in a move that has intensified trade tensions between the world’s two largest democracies and long-time strategic partners. The fresh duties come on top of earlier levies, leaving Indian exporters facing one of the steepest tariff regimes imposed by Washington in recent years.

The measure stems partly from India’s continued purchases of Russian oil, which drew a punitive 25 percent tariff earlier this month. That charge is now combined with an existing 25 percent duty on a wide range of Indian exports, raising total tariffs to as high as 50 percent on products including garments, gems and jewellery, footwear, sporting goods, furniture, and chemicals. Analysts note that these levels are now on par with tariffs levied by the U.S. on China and Brazil, and threaten to undercut thousands of small exporters and jobs, particularly in Prime Minister Narendra Modi’s home state of Gujarat.

India’s Commerce Ministry has yet to issue an official response, but a ministry official speaking on condition of anonymity indicated that financial support packages will be rolled out to help exporters absorb the shock. Officials said measures would include financial assistance as well as incentives to diversify exports toward markets such as China, Latin America and the Middle East.

In a notice to shippers, the U.S. Customs and Border Protection agency confirmed a limited exemption: goods from India that had already been loaded onto ships before the midnight deadline can still enter the U.S. under the earlier tariff structure if they arrive before 12:01 a.m. EDT on September 17. Steel, aluminium and their derivative products, passenger vehicles, copper, and other items already covered under separate Section 232 national security tariffs of up to 50 percent also remain exempt.

Trade officials in New Delhi point out that India’s average tariff on U.S. imports is around 7.5 percent. By contrast, the U.S. Trade Representative’s office highlights significantly higher barriers, citing average duties of 39 percent on American farm goods and up to 100 percent on automobiles. Despite multiple rounds of negotiations, the two countries failed to bridge differences before the new tariffs were activated.

As the deadline approached, U.S. officials gave no indication that India could avoid the hike. White House trade adviser Peter Navarro, when asked directly whether the higher duties would take effect, responded simply: “Yeah,” offering no further explanation. The tariff escalation follows five unsuccessful rounds of bilateral talks in which India had signalled optimism that levies could be capped at 15 percent, in line with the preferential rates extended to Japan, South Korea and the European Union. Officials on both sides have privately conceded that political missteps and misjudgments contributed to the breakdown.

The scale of trade at stake is substantial. Two-way goods trade between the U.S. and India reached $129 billion in 2024, with Washington recording a $45.8 billion trade deficit. Exporter groups warn that nearly 55 percent of India’s $87 billion worth of merchandise exports to the U.S. could now be affected, giving a competitive edge to rival exporters in countries such as Vietnam, Bangladesh and China.

“The move will disrupt Indian exports to the largest export market,” said S.C. Ralhan, president of the Federation of Indian Export Organisations. He estimated that more than half of India’s shipments — including textiles, chemicals and leather — will now face a price disadvantage of 30 to 35 percent against competing nations. He urged the government to consider a one-year moratorium on bank loan repayments for affected exporters, as well as extending low-cost credit and easing access to financing.

Economists have also pointed to currency policy as a tool. Rajeswari Sengupta, professor at Mumbai’s Indira Gandhi Institute of Development Research, argued that allowing the rupee to depreciate could indirectly support exporters by restoring some of the competitiveness lost under the new tariff regime. Yet many warn that prolonged tariffs at this level could undermine India’s growing reputation as an alternative manufacturing hub to China, particularly in electronics and smartphone assembly.

The trade standoff has also raised questions about the broader U.S.-India relationship, which in recent years has been bolstered by shared strategic interests in countering China’s regional influence. On Tuesday, however, both the U.S. State Department and India’s Ministry of External Affairs issued identical statements stressing that senior officials had met virtually a day earlier and reaffirmed their commitment to strengthening bilateral ties. Both sides also underscored their support for the Quad grouping, which brings together the U.S., India, Japan and Australia in a strategic partnership.

Trump had originally announced on August 7 that tariffs on Indian imports would be doubled to 50 percent, citing India’s continued purchases of Russian crude oil. At that time, Washington gave New Delhi a 21-day window to negotiate an alternative arrangement. With talks failing to yield results, the additional 25 percent duty officially came into force at 12:01 a.m. on August 27, pushing the overall tariff rate to its current peak.

While the Modi government has called the measures “unjustified and unreasonable,” U.S. Treasury Secretary Scott Bessent has accused India of “profiteering” from reselling Russian oil. Analysts say both nations now face a critical test: whether they can contain the immediate economic fallout and salvage the broader partnership, or whether the dispute will mark the beginning of a deeper rupture in ties between two key global players.