Will escalating US tariffs push India to the edge?
The United States’ decision to impose tariffs of up to 50% on Indian imports has rattled New Delhi, triggering capital outflows, weakening exports, and threatening growth in key sectors.
The move, announced by President Donald Trump in August 2025, was framed as retaliation for India’s continued purchases of Russian oil.
According to Moody’s Ratings, the tariffs could shave 0.3 percentage points off India’s real GDP growth this fiscal year. Foreign investors have already pulled nearly US$3 billion from Indian equities since July, with benchmark indices falling sharply (Reserve Bank of India data, 2025).
Electronics (US$14.4 billion in exports to the US), pharmaceuticals (US$10.9 billion), and cut and polished diamonds (US$4.8 billion) are among the most exposed industries (India Ministry of Commerce, 2024). Industry groups warn that 200,000–300,000 jobs could be at risk in export-driven clusters.
The tariffs underscore Washington’s growing use of trade as a political weapon, a tactic analysts say reflects US domestic politics more than trade imbalances. “These measures are as much about signalling toughness at home as they are about India,” says Chris Devonshire-Ellis, Chairman of Dezan Shira & Associates, in a note to investors.
Despite the pressure, India retains buffers with the rupee having depreciated moderately, easing dollar costs, while the country’s services exports, worth US$205.2 billion in FY2024, remain resilient (RBI, 2025). But the episode has reinforced calls in New Delhi to diversify away from Western markets.
Analysts highlight three strategic imperatives, including deepening Asian integration through supply chain links with ASEAN and Gulf states, expanding non-dollar trade, building on the recent India–UAE rupee-dirham settlement, and accelerating competitiveness reforms, including logistics upgrades and digitisation of small firms.
With US$79.4 billion in goods exports to the US in 2024 (UN Comtrade), India’s dependence on the American market remains a vulnerability.
For New Delhi, the tariffs are less a temporary shock than a warning in a turbulent global order; resilience must be built at home and abroad.
This story is written and edited by the Global South World team, you can contact us here.
