Indian exporters are preparing for a severe blow after the US confirmed it would impose an additional 25 percent tariff on all Indian-origin goods from Wednesday, raising total duties to as high as 50 percent. The move, among the steepest levies ever applied by the US, comes after President Donald Trump accused New Delhi of indirectly funding Russia’s war in Ukraine through record oil purchases.
According to a US Homeland Security notification, the new tariffs will take effect from 12:01 a.m. EDT on Wednesday (9:31 am IST), covering goods entering the US for consumption or withdrawn from bonded warehouses.
White House trade adviser Peter Navarro and US Treasury Secretary Scott Bessent alleged that India’s surging Russian oil imports-–now accounting for 42 percent of its crude intake compared with less than 1 percent before the war--amounted to “profiteering” and undermined sanctions.
New Delhi has not issued an immediate official response. However, a senior Commerce Ministry official said the government plans to provide exporters with financial support and incentives to diversify to new markets, particularly in Asia, Latin America and the Middle East.
Industry groups estimate the higher tariffs could hit 55 percent of India’s $87 billion in annual shipments to the US. Competitors such as Vietnam, Bangladesh and China stand to benefit.
“The US customers have already stopped new orders. With these tariffs, exports could fall by 20–30 percent from September,” said Pankaj Chadha, president of the Engineering Exports Promotion Council. He added that the government has promised relief measures such as subsidised credit, though exporters see limited scope to offset losses in alternative markets.
The diamond and jewellery sector, which sends nearly a third of its $28.5 billion annual exports to the US, is already struggling from weak Chinese demand. Higher tariffs risk closing access to its largest market, pushing the industry to a two-decade low.
Economists warn the escalation could dent India’s broader growth trajectory. The drag on GDP could reach 0.8 percentage points in both 2025 and 2026 if the full 50 percent tariffs remain in place. Analysts also cautioned that corporate earnings in India could face some of the sharpest downgrades in Asia, despite potential cushioning from domestic tax cuts under discussion.
Foreign Minister S. Jaishankar last week pointed out that US criticism over Russian oil purchases was not directed at other major buyers such as China or the European Union. Refining companies indicated they would keep sourcing oil on commercial terms unless specifically directed otherwise.
Hopes of a deal have collapsed after five rounds of talks failed to yield compromise. Officials said political misjudgements and mistrust derailed negotiations that once appeared close to capping tariffs at 15 percent.
Prime Minister Modi has pledged not to compromise the interests of farmers and is simultaneously seeking to recalibrate ties with Beijing, ahead of his first visit to China in seven years later this month.