WASHINGTON/NEW DELHI: Indian exporters are facing acute uncertainty after US President Donald Trump issued an executive order imposing an additional 25 percent tariff on Indian goods citing New Delhi’s continued imports of Russian oil, sharply escalating tensions between the two countries after trade talks collapsed.
The tariff shock has created waves of insecurity in major exporting industries, and the threat of mass order cancellations hangs over India’s vital trade relationship with its biggest export market. US consumers confronted with increased prices and greater competition from Vietnam, Bangladesh, and Turkey, where tariffs are several percentage points lower—have started to withhold or even cancel orders. Industry officials caution that if the strain is not alleviated by new government incentives, textile and garment exports may dip, even leading to redundancies and layoffs as factories find it challenging to stay competitive.
Gems, jewellery, and leather exporters have similar fears. The US absorbed almost a third of India’s world jewellery exports in 2024, amounting to $28.5 billion. Industry officials point out that the “blanket tariff” will raise prices and compel firms to postpone deliveries and reduce output.
Even India’s pharma industry, which relies greatly on US consumption, is under threat once more. Analysts estimate that the increased tariffs and penalty, if continued, would impose a 2-8pc damage to corporate profits and could dash hopes of India becoming a low-cost pharma exporter for the world.
The Federation of Indian Export Organisations (FIEO) has raised the alarm, reporting an increase in desperate pleas from exporters on order postponements. Market analysts also observe the across-the-board halt in expansion plans—businesses had been preparing for modest tariffs, only to be caught off guard by the size of the announcement. “From workers to big manufacturers, every part of the value chain is under tremendous stress. If the penalty element comes on top of the 25pc, it may cause buyers to go cold on orders entirely,” cautioned Kirit Bhansali, chairman of the Gem & Jewellery Export Promotion Council.
In addition to short-term disruptions, the policy change is fuelling concerns regarding India’s long-run competitiveness. Competition in Southeast Asia is protected by lower tariffs courtesy of effective bilateral agreements, which could shunt international supply chains away from India. While exporters persuade the Indian government to provide immediate fiscal relief and urge the restarting of stalled trade negotiations, the expectation is for a cut in the tariff rate and a definitive plan for cooperation before the make-or-break US holiday season of sales.
With talks to reopen in mid-August, Indian export industries are in limbo—trapped between the spectre of lost orders, uncertain penalties, and an urgent desire for a stable, two-way trade system. The US Senate’s proposed bill to impose 500pc tariffs on countries buying Russian oil, gas and uranium has sparked concerns in India.
Targeting a partner like India over a rival like Russia may weaken the coalition Washington seeks to build. The proposed tariffs could disrupt global trade, affecting not just Russia but also US allies and domestic consumers. Trade disputes have long strained US-India ties, with Trump’s first term seeing tariff battles and the cutting of India’s Generalized System of Preferences (GSP) benefits, despite deepening security ties. The bill’s fate remains uncertain, with potential implications for US-India relations and global trade dynamics.
Earlier, the US President issued an executive order imposing an additional 25 percent tariff on Indian goods. The new measure raises tariffs on some Indian goods to as high as 50 percent — among the steepest faced by any US trading partner, foreign media outlets and wire services reported. In an executive order issued from the White House, the US president said: “I find that the government of India is currently directly or indirectly importing Russian Federation oil.”
Trump explained that Russia’s continued military actions in Ukraine constituted a “national emergency” and it was therefore “necessary and appropriate” to place heightened tariffs on India, a major consumer of its petroleum products.
“The actions and policies of the Government of the Russian Federation continue to pose an unusual and extraordinary threat to the national security and foreign policy of the United States.”
“Accordingly, and as consistent with applicable law, articles of India imported into the customs territory of the United States shall be subject to an additional ad valorem rate of duty of 25%.”
The US president further said he determined it “necessary and appropriate” to impose an additional ad valorem duty on imports of articles of India since it was directly or indirectly importing Russian oil.
The order maintains exemptions for items targeted by separate sector-specific duties such as steel and aluminum, and categories that could be hit like pharmaceuticals.
The move is expected to hit key Indian export sectors including textiles, footwear, and gems and jewellery and marks the most serious downturn in US-India relations since Trump returned to office in January.
It also comes as Indian Prime Minister Narendra Modi prepares for his first visit to China in over seven years, suggesting a potential realignment in alliances as ties with Washington fray.
Indian TV news channels reported that Modi will visit China on August 31 for the summit of the Shanghai Cooperation Organisation. “India will take all actions necessary to protect its national interests,” India’s external affairs ministry said in a statement, saying it was “extremely unfortunate that the US should choose to impose additional tariffs on India for actions that several other countries are also taking in their own national interest.”
It said India’s imports were based on market factors and aimed at energy security for its population of 1.4 billion.
India’s National Security Advisor Ajit Doval is currently in Russia for a visit focused on strengthening New Delhi’s defence and energy ties with Moscow. External Affairs Minister S Jaishankar is also expected to visit Moscow later this month.
According to reports, Doval will hold closed-door meetings with senior Russian officials to discuss regional stability, counterterrorism cooperation, and energy security. An Economic Times report said that India is looking to purchase additional S-400 defence systems. There are also rumours that India is exploring purchase of Su-57 fighter jets from Russia.
According to Russian media outlet TASS, the visit is part of a planned schedule and will focus on defence cooperation between India and Russia. “The current escalation of the geopolitical situation will also be discussed. Apart from that the topics will include such pressing matters as supplies of Russian oil [to India],” the source said.
Trade analysts warned the tariffs could severely disrupt Indian exports. The additional 25 percent tariff comes into effect 21 days after August 7, the order said.
“With such obnoxious tariff rates, trade between the two nations would be practically dead,” said Madhavi Arora, economist at Emkay Global.
Indian officials acknowledged pressure to return to negotiations with the Trump administration. A phased cut in Russian oil imports and diversification could be a part of the compromise.
“We still have a window,” said a senior Indian official, requesting anonymity. “The fact that the new tariffs take effect in 21 days signals the White House is open to talks.”
Another official said there were no immediate plans for Modi or senior leaders to travel to Washington, nor were any retaliatory measures being considered.
Instead, the government is weighing relief for exporters, including interest subsidies and loan guarantees. A sharp drop in U.S.-bound shipments could drag India’s GDP growth below 6% this year, down from the central bank’s 6.5% forecast, said Sakshi Gupta of HDFC Bank.
India’s rupee weakened in offshore non-deliverable forwards market while stock futures fell marginally after the announcement.A senior Indian official said New Delhi was blindsided by the sudden imposition of the new levy and the steep rate, as both countries continue to discuss trade issues. Trump’s decision follows five rounds of inconclusive trade negotiations, which stalled over US demands for greater access to Indian agriculture and dairy markets.
India’s refusal to curb Russian oil purchases — which surged to a record $52 billion last year — ultimately triggered the tariff escalation.
“Exports to the US become unviable at this rate. Clearly, risks to growth and exports are rising, and the rupee may face renewed pressure,” said Garima Kapoor, economist at Elara Securities. “Calls for fiscal support are likely to intensify.”
Congress leader Rahul Gandhi on Wednesday claimed that Prime Minister Narendra Modi cannot stand up to US President Donald Trump despite his repeated threats due to “the ongoing US investigation into Adani”.
In a post on X, Gandhi said, “India, please understand: The reason PM Modi cannot stand up to President Trump despite his repeated threats is the ongoing US investigation into Adani. One threat is to expose the financial links between Modi, AA, and Russian oil deals. Modi’s hands are tied.”
The Indian Congress party hit out at Prime Minister Narendra Modi, saying his personalised and “headline-grabbing style of huglomacy” has been an “abysmal failure”.
Noting that US President Donald Trump has hit India “hard and unjustly”, Congress general secretary, communications, Jairam Ramesh called for a comprehensive reset of India’s foreign policy and said PM Modi should shed his ego and take inspiration from Indira Gandhi in the manner she stood up to the US’ “bullying” in the 1970s.
“Now President Trump, while still claiming to be a friend of Mr Modi, has hit India hard and unjustly. While his tariff and penalty actions are simply unacceptable, the fact remains that they also reflect the abysmal failure of Mr Modi’s personalised and headline-grabbing style of huglomacy,” he said in a post on X.
“India has stood up to the bullying of the US in the 1970s, especially under the Prime Ministership of Smt Indira Gandhi. Instead of defaming, distorting, and denigrating her, Mr Modi should shed his ego — if indeed that were possible — and take inspiration from the manner in which she stood up to the USA. India’s foreign policy and administration needs a comprehensive reset,” Ramesh also said.
Recalling past events under the Modi government, the Congress leader said the prime minister went to the US and attended a ‘Howdy Modi’ event in Houston in September 2019. “President Trump was also present and Mr Modi broke with all tradition and declared ‘Ab ki Baar Trump Sarkar’,” he said.
In February 2020, Ramesh said, President Trump was hosted by Modi to a gala ‘Namaste Trump’ event in Ahmedabad and in February 2025, “much was made of the fact that Modi was amongst the earliest heads of government who met with President Trump in his second innings”.
Earlier, it was said that the External Affairs Minister S Jaishankar had a front row seat at President Trump’s inauguration and was the first to meet Secretary of State Marco Rubio, the Congress general secretary said in a dig at the government.
“Mr Modi wooed Elon Musk and his family as well, at a time when Mr Musk was very close to President Trump. The wooing of Mr Musk was part of Mr Modi’s strategy to please President Trump.
“Mr Modi has time and again flaunted his supposedly close friendship with President Trump. On Feb 14, 2025, he had shown off his knowledge of algebra by telling President Trump that MAGA + MIGA = MEGA,” the Congress general secretary said.
He said Prime Minister Modi has kept completely quiet even as President Trump has claimed 33 times that he intervened to bring about a ceasefire between India and Pakistan.
“There was total silence from the PM and his close circle when President Trump hosted Pakistan’s Chief of Army Staff Field Marshal Asim Munir to lunch on June 18, 2025, at the White House.”
