On August 6, 2025, President Trump introduced a 50% tariff on Indian exports under an executive order. The first 25% took effect on August 7, with the remaining 25% scheduled for August 27. The decision came amid US concerns over India’s continued purchases of Russian oil and defense equipment. Trump had earlier warned, stating, “If they’re going to do that, then I’m not going to be happy.”
In a social media post, Trump alleged that India was buying large quantities of Russian oil and reselling much of it on the open market for significant profits. “They don’t care how many people in Ukraine are being killed by the Russian war machine. Because of this, I will be substantially raising the tariff paid by India to the USA.”
Analysts warn that such steep tariffs could significantly reduce India’s export competitiveness. They pose a significant setback to India’s dream of becoming a manufacturing hub under the ‘Make in India’ initiative. ICRIER warns that 70% of India’s export business will be at risk, while the Global Trade Research Initiative estimates the loss of up to USD 50 billion.
As a result, scheduled talks between Indian and US delegates have been postponed, stalling progress on the bilateral trade deal. While the Indian government remains optimistic, calling the agreement “multi-dimensional,” it also emphasizes balancing trade with broader security concerns. The Ministry of External Affairs criticized the move and hit back, asserting that “it is revealing that the very nations criticizing India are themselves indulging in trade with Russia. Unlike our case, such trade is not even a vital national compulsion [for them].”
The Indian banks and policymakers had to step in to extend their support towards the exporters in the textile and chemical industries. The measures will include, as stated by the Indian bank spokesperson, “We are engaging with exporters and assessing their working capital needs. Enhanced access to export insurance and credit guarantees and working capital lines tailored for MSME clusters in high-impact zones such as Tirupur and Surat are among the measures taken by our bank to offset the adverse impact. Also, we are considering some interest concessions for a temporary period and waiving some administrative fees such as loan processing charges, forex handling charges, and collection fees.”
If the US maintains its hardline stance on tariffs, India may seek to strengthen partnerships with Russia and China to offset losses. However, analysts warn that prolonged tensions could lead to economic fallout for both economies. According to trade economist Dr. Arvind Krishnan, “If both sides fail to reach a compromise, it could set back India–US trade relations by nearly a decade and open the door for rival economies to capture key export markets.” The focus now shifts to the upcoming negotiations between New Delhi and Washington, which will determine whether Trump will reduce the tariffs or stand firm on them.
