Trade disputes have shaped relations between major economies for decades, but the latest move by the United States to impose steep tariffs on Indian exports has brought the partnership between the two countries to a new point of friction. With President Donald Trump ordering an increase of duties to as high as 50 per cent on a wide range of Indian goods, exporters across India are bracing for the consequences. What makes the development even more sensitive is that these measures are not only about economics but also linked to New Delhi’s purchase of Russian oil, which Washington views as a matter of strategic disagreement. The result is a policy shift that strikes at the heart of India’s export sectors, while sparing a few industries that remain essential for American markets. The impact is already being felt from Surat’s diamond workshops to Tiruppur’s garment factories, and the effects are likely to ripple through India’s economy for years if no settlement is reached.
The United States has long been one of India’s largest trading partners, and in many categories it is the single biggest market. From textiles and jewellery to seafood and auto components, Indian exporters have built supply chains that depend heavily on American consumers. The sudden doubling of tariffs in many of these categories amounts to a severe price shock, removing the cost advantage that Indian goods enjoyed. Gems and jewellery, textiles, and seafood are industries where the US share of exports has been particularly high, and they now face the sharpest squeeze. In contrast, some areas such as smartphones, electronics, and pharmaceuticals have been temporarily insulated, partly because American companies depend on these supplies to meet domestic demand. The uneven application of tariffs creates a divided picture: some industries must scramble to survive while others continue operations with little disruption.
The blow to the jewellery industry is especially severe. For decades, the United States has been the largest destination for Indian gems and jewellery, accounting for nearly one-third of the sector’s global sales. Exports worth close to ten billion dollars a year are now subject to duties of more than fifty per cent. Surat, the world’s hub for diamond polishing, is experiencing a sharp slowdown in orders, with workshops reporting layoffs and shortened hours. The effect on employment is particularly troubling, because this is a labour-intensive industry where hundreds of thousands of workers depend on export demand. If American buyers shift to suppliers in Thailand or Africa due to price competitiveness, India risks losing market share that took decades to establish.
The textile and apparel industry presents a similar picture. The United States is India’s biggest buyer of garments, with purchases exceeding ten billion dollars annually. Clusters such as Tiruppur in Tamil Nadu, which produce cotton knitwear for global retailers, are among the most vulnerable. More than six hundred thousand workers are engaged in this cluster alone, and the imposition of tariffs of over sixty per cent wipes out any cost advantage India had over competitors such as Bangladesh or Vietnam. Already under pressure from rising input costs and strong competition, the sector now faces the prospect of cancelled orders and the closure of smaller units. The decline in exports could spill into domestic unemployment, as many of these clusters employ migrant labour working on slim margins.
Seafood, particularly shrimp, is another casualty. The United States imports about half of India’s shrimp exports, worth around two and a half billion dollars annually. Tariffs that lift the total duty to sixty per cent will make Indian shrimp far more expensive compared to Ecuadorian exports, which enjoy lower tariffs due to a preferential trade arrangement. Exporters warn that India could lose its competitive edge almost overnight, with long-term damage to coastal communities that rely on aquaculture for livelihoods. States like Andhra Pradesh and Gujarat, which are major hubs of shrimp farming, now face the risk of widespread job losses and financial stress among small producers.
The auto components sector is equally exposed. With annual exports worth more than six billion dollars to the United States, India has built a strong reputation for parts such as gearboxes, engines, and transmission systems. Now, while smaller vehicle parts face duties of twenty-five per cent, larger components for trucks and farm equipment are subject to the full fifty per cent tariff. Big exporters like Bharat Forge, Motherson, and Sona Comstar stand to lose access to a vital market. Since Mexico and European suppliers already enjoy geographical and trade advantages, Indian firms could lose market share permanently if tariffs remain in place for long.
Chemicals and organic compounds, another export category worth several billion dollars, also fall under the higher duties. This sector is dominated by small and medium enterprises, many of which operate on tight margins. The added costs of tariffs will make Indian chemicals less attractive than imports from Japan or South Korea, countries that enjoy preferential trade ties with the United States. For an industry that accounts for a large share of India’s industrial clusters, the pressure could be immense.
Agricultural goods, including basmati rice, tea, spices, and processed foods, are also in the firing line. Exports worth six billion dollars annually now face fifty per cent duties, threatening to dislodge India from its position as the largest exporter of basmati rice. If American consumers shift to rice from Thailand or Pakistan due to lower prices, Indian farmers and processors will face reduced demand. For a sector already challenged by volatile prices and climate pressures, the tariff shock adds another layer of uncertainty.
Leather, carpets, and furniture also find themselves on the wrong side of the tariff line. India’s leather goods sector, heavily reliant on exports, has been struggling with rising raw material costs. The imposition of fifty per cent tariffs makes survival even harder. Similarly, the carpet and home textile industry, concentrated in states like Uttar Pradesh, faces effective duties of over fifty per cent. With inflation already reducing American demand, these industries risk being squeezed out of the market entirely.
Not every sector, however, has been hit. Smartphones and electronics, where American firms such as Apple rely heavily on Indian manufacturing, have been spared for now. India exported nearly seven billion dollars’ worth of devices to the United States in 2024, with Apple producing a majority of US-bound iPhones in India through partners such as Foxconn and Tata Electronics. The exemption allows Apple to continue its supply chain without disruption, but the protection may not last indefinitely. Trump has already criticised companies for moving production overseas, raising doubts about how long these exemptions will remain.
Pharmaceuticals are also excluded, reflecting the dependence of the United States on affordable Indian generics. Indian drugmakers exported more than seven billion dollars in the past eighteen months, and major players such as Dr Reddy’s, Sun Pharma, Lupin, and Aurobindo continue to serve as vital suppliers. For now, medicines are considered too essential to restrict, but American policymakers have already hinted that they may push pharmaceutical companies to shift more production back to the US in future.
Renewable energy products such as solar cells and wind turbines have also been left outside the tariff net. Companies like Reliance, Adani, and Waaree continue to export without interruption, in line with America’s clean energy targets. Petroleum products, books, plastics, and some specialised machinery are also exempted, sparing about twenty-eight billion dollars’ worth of Indian exports.
The Indian government has reacted strongly, calling the tariffs unjustified and unreasonable. New Delhi argues that its oil purchases from Russia are dictated by market conditions and the need to secure affordable energy for 1.4 billion people. The Ministry of External Affairs has accused the United States of unfairly targeting India for policies that many other countries are also pursuing. Moscow has backed India’s position, criticising Washington for using trade as a tool of political pressure.
American officials, on the other hand, maintain that India is “profiteering” from discounted Russian oil and undermining sanctions. Treasury Secretary Scott Bessent has tried to balance criticism with optimism, saying that while disagreements remain, the strong personal ties between President Trump and Prime Minister Modi could help the two countries eventually find a solution. Yet until such a compromise emerges, exporters on the ground continue to feel the weight of the tariff wall.
The impact on India’s micro, small, and medium enterprises is particularly concerning. These firms account for more than seventy per cent of export capacity in sectors now hit by tariffs, such as textiles, jewellery, seafood, and chemicals. Clusters like Tiruppur, Surat, and Panipat operate on low margins, where even minor increases in costs can upset business models. A fifty per cent tariff strips them of any price competitiveness, leaving them vulnerable to losing long-term contracts. The withdrawal of the Generalised System of Preferences in 2019 had already eroded their advantage in the US market, and the new duties double the challenge. Analysts warn that widespread job losses could follow, particularly among contract workers and daily wage earners who form the backbone of these industries.
Trade experts estimate that nearly two-thirds of India’s exports to the United States, worth more than sixty billion dollars, now fall under the higher tariff bracket. If the measures persist, Indian exports could decline to under fifty billion dollars next year, erasing gains achieved in recent years. The scale of the disruption will depend on whether India can redirect exports to other markets, but replacing the American market is far from easy. The United States remains unique in the scale of its demand and the value of its purchases, especially in sectors like jewellery and textiles where few alternative markets can absorb the same volume.
In the short term, the tariffs mean higher costs for American consumers as well. Textiles, seafood, and jewellery will all become more expensive in US stores. Inflationary pressures in the US economy may increase, though the government appears willing to accept this in order to pursue its foreign policy objectives. In the long run, American businesses may also feel the strain if they lose access to affordable Indian supplies.
The broader question is whether the tariffs are temporary bargaining tools or the beginning of a longer confrontation. If they are lifted after negotiations, the damage may be contained. But if they remain in place for several years, entire Indian industries may restructure or collapse under the weight of lost demand. For India, the challenge lies in balancing strategic independence in foreign policy with the economic realities of trade. For the United States, the question is whether the political cost of inflation and strained relations with a key partner outweighs the benefits of pressuring India over Russia.
What is certain for now is that the tariff shock has divided Indian exporters into two camps. On one side are the spared industries — pharmaceuticals, electronics, renewable energy — which continue business as usual. On the other are sectors like textiles, jewellery, seafood, and auto parts, where livelihoods and entire regional economies are at risk. The longer the dispute continues, the harder it will be for the affected industries to hold on to their place in the American market.
