‘Strategic shock’: Donald Trump’s tariffs to hit 66% of India’s exports to US; China, Vietnam set to gain
GTRI believes that the US tariffs implementation represents a substantial trade challenge for India’s economy. (AI image)
The Donald Trump administration’s move to impose 50% tariffs on India effective August 27, will pose a significant export challenge for the world’s fifth largest economy. The US administration has released a draft notification outlining its strategy to enforce the supplementary 25% duty on goods from India, following President Donald Trump’s earlier declaration.The draft directive, released by the Department of Homeland Security on Monday, specified that the heightened duties would affect Indian merchandise that are “entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 am eastern daylight time on August 27, 2025”.
50% US tariffs impact on India: It’s advantage China, Vietnam
According to a report by Global Trade Research Initiative (GTRI), the duties will affect $60.2 billion worth of Indian exports, encompassing textiles, gems and jewellery, shrimp, carpets and furniture.Alternative suppliers, particularly China, Vietnam and Mexico, are positioned to capture market share in sectors where Indian exports face higher tariffs. The labour-intensive sectors in India anticipate a possible 70% reduction in export volumes.GTRI believes that the US tariffs implementation represents a substantial trade challenge for India’s economy. The measures affect roughly 66% of India’s total exports to the US, approximately $86.5 billion! This situation necessitates strategic adjustments to maintain India’s economic growth whilst managing the impact on employment and industrial competitiveness, it says.
- India faces a severe reduction in exports to the US, with projections showing a decline from $86.5 billion in FY2025 to $49.6 billion in FY2026.
- GTRI analysis indicates that whilst 30% of exports ($27.6 billion) will remain duty-free and 4% ($3.4 billion) in auto parts will attract a 25% tariff, a significant 66% ($60.2 billion) comprising apparel, textiles, gems & jewellery, shrimp, carpets, and furniture will face a 50% tariff.
- This substantial tariff is expected to reduce competitiveness, potentially causing a 70% reduction in these sectors to $18.6 billion, resulting in an overall 43% decline in US-bound exports and significant job losses.
- This development poses a critical challenge to India’s established position in US labour-intensive markets, threatening substantial unemployment in export-focused regions and potentially diminishing India’s role in global supply chains.
- Nations including China, Vietnam, Mexico, Turkey, alongside Pakistan, Nepal, Guatemala, and Kenya are positioned to benefit, possibly securing long-term market advantages even after tariff revisions, says GTRI.
US is still biggest market for India
India’s nominal GDP stood at $4,270 billion in FY2025 and would typically achieve 6.5% growth in FY2026 under standard circumstances. The reduction in US exports by $36.9 billion adjusts the FY2025 baseline to $4,233.1 billion. Calculating 6.5% growth from this revised figure results in FY2026 GDP of $4,508.25 billion, yielding an actual growth rate of 5.6%—reflecting a decline of 0.9 percentage points, in the worst case scenario, says GTRI.
