(This article was originally written by T. Murugan, Publisher, Ananda Vikatan, and was published in the issue dated August 13, 2025.)
In today’s deeply interconnected global economy, a single impulsive decision by a world leader can disrupt lives and livelihoods across continents. Former U.S. President Donald Trump’s recent comments and tariff threats aimed at India could have serious consequences for the country’s economy, particularly its export-driven sectors.
Trump has accused India of being “the world’s most taxed country” and criticised its trade ties with Russia, particularly the import of crude oil and military equipment. He has also attacked the BRICS alliance—comprising Brazil, Russia, India, China, and South Africa—calling it an “illegal” grouping, especially for exploring non-dollar trade systems.
In response, Trump has announced a 25 percent tariff on Indian exports, coupled with an additional 10 percent penalty for India's participation in BRICS. This could result in a total tariff burden of 35 percent.More alarmingly, a proposed bill in the U.S. Congress seeks to impose a 500 percent tariff on goods from BRICS nations. If passed, it could severely damage India's export competitiveness.
Several of India’s key exports already face high tariffs. These include:
31.7% on fabric sheets
35% on machinery and spare parts
38.5% on gold and silver jewellery
Up to 45% on bed sheets and curtains
50% on iron and aluminium
The steel and aluminium sectors are already reeling. In 2018–19, India exported $5 billion worth of steel and aluminium to the U.S. Today, those orders have stopped, partly due to cheaper alternatives from China. India cannot divert these goods to other markets, as China dominates the global supply chain with lower production costs.
The United States is India’s largest export market. In the last financial year, India exported $86.5 billion worth of goods to the U.S.—nearly one-fifth of its total exports. If the full extent of Trump’s proposed tariffs comes into effect, this could shrink by a third, affecting industries such as electronics, machinery, textiles, jewellery, automotive components, and seafood—industries that collectively employ millions.
India has also relied heavily on the European Union (EU), which received $75.7 billion in Indian exports last year. But this market is also tightening regulations. The EU is implementing a “Carbon Border Adjustment Mechanism” to tax carbon-intensive products like steel and aluminium. It is also preparing a “Deforestation Prevention Act” to tax agricultural products linked to forest loss.
These shifts leave India with fewer alternatives. Unlike the U.S., these new taxes are framed as environmental protection policies, making them harder to challenge diplomatically.
The readymade garment sector, employing lakhs of workers, is particularly vulnerable. India exported $10.91 billion worth of garments to the U.S. in 2023–24. However, the 25% duty imposed by the U.S. makes Indian garments less competitive compared to those from Vietnam and Bangladesh, which benefit from lower tariffs.
“Some exporters used to send up to 70% of their production to the U.S. Now, there are no fresh orders,” says Sudhir Sekri, Chairman of the Apparel Export Promotion Council. The council has urged the Indian government to absorb the tariff differential and offer low-interest loans to support struggling manufacturers.
In February, Trump and Indian Prime Minister Narendra Modi promised that a U.S.–India trade deal was close. Since March, delegations have met five times in Delhi and Washington. Although Trump postponed tariff hikes by 90 days, he has continued to raise the stakes. In the interim, countries like the UK, Japan, Indonesia, and South Korea signed deals with the U.S., offering greater market access and investment commitments in exchange for tariff relief.
Observers note that these negotiations often involve creating an illusion of fairness—offering similar deals to multiple countries while framing each as a win.
Trump has expressed frustration over India’s reluctance to open its markets to American agricultural and dairy products. With a population of 1.4 billion, India is viewed by U.S. producers as a lucrative market for subsidised products like soybeans, maize, and mustard oil.
However, India’s farming sector is largely made up of smallholders. Agriculture employs nearly 40% of India’s rural population. Allowing unrestricted imports of subsidised U.S. farm goods would destroy domestic livelihoods. For this reason, India has consistently excluded agriculture from trade deals, including its recent free trade agreement with the UK.
U.S. officials, in turn, accuse India of shielding large domestic corporations and resisting market reforms.
India is not in a position to retaliate like China or Canada, nor does it want to appear submissive like Pakistan. Other countries have negotiated compromises to avoid heavy tariffs: Japan, South Korea, and the EU offered duty cuts, agreed to buy more U.S. goods, and promised investments. In return, they were moved to a more favourable 15% tariff category.
India may have to adopt a similar strategy—not to appease, but to protect key industries and jobs.
Trump claims India is being penalised for importing Russian crude oil. But the context tells a different story.
Before the Ukraine war, Russia accounted for just 0.2% of India’s oil imports. Post-sanctions, Russia began offering oil at steep discounts—at times $30 per barrel below market price—leading to a spike in Indian imports. But the discount has since narrowed to $5. More recently, India has scaled back purchases from Russia and increased imports from the U.S.
Moreover, Indian refiners, such as Reliance, export much of this oil to the U.S. in the form of petrol, diesel, and aviation fuel. Notably, these refined petroleum products are exempt from U.S. tariffs.
While criticising India’s trade with Russia, Western countries themselves continue to import Russian gas and uranium, revealing a clear double standard.
Despite aggressive rhetoric, the U.S. has exempted several critical Indian exports from tariffs, including pharmaceuticals, smartphones, semiconductors, computers, and crude oil. These are essential to the functioning of U.S. healthcare and tech sectors.
However, Trump has warned Indian pharmaceutical companies that they may soon face a 200% duty—a move that could cripple a key export industry.
Trump’s tariff threats are not just a political tool—they have the potential to inflict real economic damage on India’s manufacturing and export sectors. At a time when India is positioning itself as a global manufacturing alternative to China, these trade barriers could derail growth.
With the world watching, India must now tread carefully: assertive enough to protect national interests, yet pragmatic enough to avoid economic fallout. The solution lies not in retaliation, but in strategy.