A Bold Trade Move by the U.S.
In a move likely to spark diplomatic and economic ripples, U.S. President Donald Trump has announced a steep 50% tariff on Indian goods, making it one of the highest levies placed on any U.S. trading partner. The decision comes amid concerns over India’s continued oil trade with Russia, despite global pressure on Russian energy exports.
Previously, Trump had levied 25% tariffs on Indian goods, citing high trade barriers. The new tariff order significantly escalates tensions and is set to go into effect in 21 days.
Limited Overall Exposure, But Sectoral Risks Loom
Despite the strong political signal, economists suggest that the overall economic impact on India could be limited. Only 20% of India’s exports go to the U.S., accounting for just 2% of GDP.
However, UBS estimates $8 billion worth of exports—particularly in gems and jewellery, apparel, textiles, and chemicals—are highly vulnerable to the new duties. These sectors may see targeted government support in the coming months.
“More Symbolism Than Substance”?
According to Brian Jacobsen, chief economist at Annex Wealth Management, the 21-day implementation window may serve as a diplomatic buffer. He notes that this could allow room for negotiation or even cancellation, suggesting the tariffs may be “more symbolism than substance.”
Indian Equities Remain Resilient
On the equities front, the impact appears muted. The Nifty 50 index has just 9% exposure to the U.S., primarily through IT services, which are not included in the current tariff list.
However, investors are watching for currency volatility, with the Indian rupee weakening in recent days and foreign inflows slowing.
Key Sectors Exempted
Some major export sectors are likely to be unaffected:
- Pharmaceuticals, one of India’s largest export segments to the U.S., remain outside the tariff scope.
- Semiconductors and electronics are exempted.
- Steel and aluminium exports are taxed separately.
- Apple’s India operations are not expected to be impacted.
What Lies Ahead
While India’s diversified trade portfolio limits overall damage, sector-specific pain is inevitable. The coming days will test the diplomatic and economic agility of both nations, with potential trade talks on the horizon.
For now, the spotlight is on India’s strategic response—and whether this tariff move strengthens or strains the already complex U.S.-India relationship.
