Tariffs Come Into Force: 50% Tariffs on Indian Exports To the US Take Effect, Key Risks For Textiles, Gems & Overall Economic Growth

Mumbai: On Wednesday, August 27, at 9:31 AM IST, the US imposed an additional 25 percent duty on Indian exports, bringing effective tariffs on many goods to 50 percent. This move marks one of the harshest trade barriers India faces globally, second only to China. According to JPMorgan, India’s effective export rate to the US now stands at 34%, far higher than ASEAN countries at 16 percent.

Key Sectors at Risk

Textiles and machinery are the most exposed, given their high value addition and labor-intensive nature. Indian textile companies such as Gokaldas, Indo Count, and Welspun Living, which derive 20–70% of their revenue from the US, are particularly vulnerable. Cotton bedlinen and jersey exports could lose their price advantage, ceding ground to competitors in Bangladesh and Vietnam.

Gems and jewellery exports are also under pressure. A 50% duty risks suppressing demand in a sector that is both heavily export-reliant and a significant employer in Gujarat and Maharashtra.

Economic Implications

The tariffs could directly hit growth by eroding market share and threatening jobs in labor-intensive industries. India’s strategy of attracting investment by offering lower duties than ASEAN rivals may be undermined, potentially deterring foreign direct investment (FDI) and technology transfer.

Impact on Current Account and Reserves

India’s Current Account Deficit (CAD) is modest at 0.6 percent of GDP, but capital inflows have slowed. JPMorgan warns that a sustained tariff shock could push the CAD toward 1.5 percent, putting pressure on the Balance of Payments (BoP). While foreign exchange reserves of USD 638 billion provide a cushion, reliance on volatile portfolio inflows leaves the economy exposed.

Services Exports Remain a Blind Spot

India’s IT and business services exports to the US, worth nearly 6 percent of GDP and three times larger than goods exports, remain untouched for now. Any potential US action on services would directly impact India’s growth model.

Broader Strategic Risks

The challenge extends beyond tariffs. India’s integration into global value chains and ability to attract investment are at stake. Without a comprehensive trade deal with the US, the country risks not only lost exports but also slower job creation and diminished investment, affecting long-term economic momentum.