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Trump's 50% tariff shock for India to hit soon - what it means for growth, jobs, and hardest-hit sectors

Trump India Tariffs Impact: US 50% tariffs on Indian exports take effect tomorrow, targeting textiles, seafood, gems, jewellery, and leather. Analysts warn the move could threaten millions of jobs and shave 0.5% off India's GDP. Back in his first term, Donald Trump had first called India as the "tariff king." Now, in his second stint in the White House, he has repeated that often and is now bringing the 50 per cent tariff hit for New Delhi. The order, Executive Order 14329, links the penalty to India's continued imports of Russian crude and defence hardware. For New Delhi, this isn't just another trade dispute. It's a direct blow to its biggest export market, with consequences for jobs, growth and entire industries that rely on American demand. Prime Minister Narendra Modi, speaking in Ahmedabad, framed it as an era of "economic selfishness" where nations secure their own interests first. He insisted India would withstand the pressure: "No matter how high the pressure, India will continue to build its strength to withstand it." Modi promised reforms, GST tweaks by Diwali to ease costs, and a push for self-reliance. The government's Council is set to convene on September 3-4 with a significant agenda focused on reducing tax levies on a variety of goods and services. Analysts caution, however, that corporate earnings, especially for banks and IT firms, may remain under pressure even with consumption tax cuts. Washington cites India's oil and defence trade with Russia as a "threat to the national security and foreign policy of the United States." Trump has also threatened additional tariffs on countries with digital taxes. The US Department of Homeland Security confirmed that all Indian goods "entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 am EDT on August 27, 2025" (9:31 am IST) will face the new 50 per cent tariff. In simple terms, every shipment landing after that deadline will face a doubled rate. Until now, Indian exports to the US faced a 25 per cent duty. The new tariff hits labour-intensive sectors hardest, while pharmaceuticals, electronics and petroleum products are spared for now. Aluminium, steel/iron, and copper will continue to face the previous 25 per cent duty but are exempt from the additional 25 per cent. As per the Global Trade Research Initiative (GTRI), India ships about $86.5 billion worth of goods to the US each year. Of this, roughly $60.2 billion (66 per cent) will now face the 50 per cent tariff. Another $3.4 billion in auto parts remains at 25 per cent, while $27.6 billion, mostly pharma, electronics and petroleum, stays duty-free. Ajay Srivastava, founder of GTRI, estimates exports from affected sectors could plunge 70 per cent, collapsing from $60.2 billion to $18.6 billion. Overall shipments to the US could fall 43 per cent, threatening hundreds of thousands of jobs across India's export hubs. Apparel and textiles India is the sixth-largest exporter of textiles and apparel globally, accounting for roughly 4-4.1 per cent of world exports in 2024, as per PIB. The sector, including handicrafts, contributed $37.7 billion (8.63 per cent) to India's merchandise exports in 2024-25, while the overall industry, including domestic consumption, is valued at $179 billion ($142B domestic, $37.7B exports). The US absorbs about 29 per cent of Indian textile and apparel exports, roughly $10.3 billion. Other major markets include the European Union and the UK. Analysts warn that the new 50 per cent US tariffs could price Indian exports out of the market. Mithileshwar Thakur, Secretary General of the Apparel Export Promotion Council (AEPC), told ET that the sector now faces a 30-31 per cent cost disadvantage relative to competitors such as Bangladesh, Vietnam, Sri Lanka and Cambodia. BBC analysis shows that under a 50 per cent tariff, a $10 Indian-made shirt would cost $16.40 in the US, compared with $13.20 from Bangladesh, $12 from Vietnam, and $14.20 from China. Ajay Srivastava adds, "We can expect a diversion of trade, with US buyers moving to Mexico, Vietnam and Bangladesh." For a sector operating on thin margins, this disruption could severely affect employment and production in key export hubs. Jewellery and diamonds India exported $10 billion in gems and jewellery to the US in FY24, according to the Ministry of Commerce & Industry. The US remains the largest market, accounting for nearly a third of the sector's $28.5 billion annual shipments. With US tariffs rising from 25 per cent to 50 per cent, exporters are bracing for significant disruption. Kirit Bhansali, chairman of the Gem & Jewellery Export Promotion Council (GJEPC), calls the new duties "doomsday" for the industry. Ajay Srivastava warns that up to 150,000-200,000 jobs could be at risk if a trade deal is not struck . As per Reuters, in Surat, where more than 80 per cent of the world's rough diamonds are cut and polished, orders are already declining. Shailesh Mangukiya, a unit owner, told the news agency, "Demand has slumped so badly that diamond packets I sold for ₹25,000 ($286) last year now barely fetch ₹18,000." Hitesh Patel, managing director of Dharmanandan Diamonds, told Reuters that US tariffs could reduce his annual revenue by 20-25 per cent, prompting plans to increase production in Botswana. Seafood India exports around ₹60,000 crore ($7.4 billion) worth of seafood annually to the US, with shrimp making up roughly 40 per cent of the total, as per Reuters. The new 50 per cent tariff could wipe out ₹24,000 crore in exports. Pawan Kumar, head of the Seafood Exporters Association of India, said, "We are shocked. Orders from US clients have been paused in recent weeks as buyers aren't willing to absorb the tariff, and neither can exporters, forcing price cuts for farmers." Andhra Pradesh, India's largest shrimp-exporting state, could see hundreds of thousands of farmers impacted. Leather and footwear India's leather industry, valued at $4.1 billion in exports, faces severe disruption. The US accounts for $870 million (around 20 per cent) of these exports, as reported by ET. Kolkata, a key hub, could see production halts, with significant implications for employment. Footwear is especially vulnerable: a $100 pair could see nearly $50 added in US duties, making Vietnamese and Indonesian products far more affordable for buyers. Kanishk Maheshwari, co-founder and managing director of Primus Partners India, highlighted the problem, noting that India's 1 per cent share in the $100-billion US leather import market is about to shrink further. Arjun Mukund Kulkarni, president of the Indian Leather Products Association (ILPA), told ET: "The industry is in a wait-and-watch mode. We are unable to offer any discounts to buyers either." Exporters are exploring partial production in Europe and other workarounds. India sends roughly 18 per cent of its total exports to the United States, equivalent to about 2.2 per cent of GDP, with key sectors like textiles, gems and jewellery, and leather shipping 30-40 per cent of their global output to America, according to Nomura. For companies operating on thin margins, the newly announced 50 per cent tariff could be crippling. Gaura Sengupta, chief economist at IDFC First Bank, estimates that the tariff could shave 0.4 per cent off FY26 GDP growth. Sakshi Gupta, principal economist at HDFC Bank, warns the impact could push growth below 6 per cent, saying, "We will have to significantly lower FY26 GDP growth forecast to below 6 per cent, baking in at least a 40-50 bps hit -- double from our earlier estimates." She adds that second-round effects on private investment, domestic manufacturing and labour markets could become a key risk. Unemployment adds to the concern. India's overall jobless rate was 5.6 per cent in June, with urban unemployment at 7.1 per cent. Millions of workers in textiles, jewellery and seafood sectors could be affected if shipments to the US decline by 20-30 per cent, potentially destabilising politically sensitive states, according to analysts. Bloomberg notes that the tariffs could further pressure corporate earnings after a weak quarter, particularly for banks and IT firms, despite recent consumption tax cuts by Prime Minister Narendra Modi aimed at boosting the economy. There's also concern that the government's fiscal plan could widen the deficit, which has already contributed to a 22-basis-point rise in benchmark yields this month. Abhishek Upadhyay, senior economist at ICICI Securities Primary Dealership Ltd, warns that if the 50 per cent tariff persists, the impact could reach 1 per cent of GDP over the full year, with wider implications for monetary policy and bond yields. Still, some support remains. The Reserve Bank of India Governor has suggested that the immediate impact of tariffs could be limited, and upcoming trade negotiations with the US offer a potential reprieve. Varun Laijawalla, a London-based fund manager at Ninety One UK Ltd, says, "A combination of China's AI-led rally, new equity issuances, and US-related geopolitical tensions has contributed to India's near-term underperformance." Market reaction Indian stocks slipped on Tuesday after Washington moved ahead with plans to slap tariffs of up to 50 per cent on Indian exports starting Wednesday. The tariff shock dominated trading sentiment, while a weaker rupee and continued selling by foreign investors added to the pressure. The Sensex shed 849.37 points, or 1 per cent, to settle at 80,786.54. The Nifty 50 fell 255.70 points, also 1 per cent, to 24,712.05. Investor wealth took a heavy hit, with the combined market capitalisation of BSE-listed firms dropping by ₹6.02 lakh crore to ₹449.38 lakh crore. Industry reactions Exporters say the 50 per cent US duty is prohibitive, pricing many Indian goods out of their largest market. Rival suppliers such as Bangladesh, Vietnam, Sri Lanka, Cambodia, and Indonesia face far lower tariffs, leaving Indian firms at a steep disadvantage. Some companies have already rushed shipments ahead of the August 27 deadline. That scramble showed up in trade data: India's exports to the US jumped nearly 20 per cent in July to $8 billion, while imports rose 14 per cent to $4.5 billion. Between April and July, exports to the US climbed 21.6 per cent to $33.5 billion. Industry officials warn the tariff shock will reverse those gains. A leather and footwear exporter, quoted by PTI, said firms will be forced to cut jobs and pause production until clarity emerges on a proposed bilateral trade agreement that once aimed to double two-way trade to $500 billion. The gems and jewellery sector, heavily dependent on the US, echoed that view. The same report quotes an exporter saying layoffs are inevitable in jewellery and diamond units. He urged the government to craft a long-term export strategy, with interest subsidies, faster GST refunds and SEZ reforms to cushion the blow. The apparel industry faces the harshest impact. With $10.3 billion in exports to the US, the sector was already struggling under the earlier 25 per cent duty. Mithileshwar Thakur said the new levy has effectively pushed Indian apparel out of the US market, leaving exporters with a 30-31 per cent tariff disadvantage compared to competitors in Bangladesh, Vietnam and Sri Lanka. Countries with lower US duties, Bangladesh, Vietnam, Cambodia, Indonesia, Pakistan, and Kenya, could quickly step in to capture India's share. Once buyers shift, winning them back isn't easy. Srivastava cautions that this could mean widespread job losses in export hubs and a reduced role for India in global value chains. He added that rivals ranging from China, Vietnam, Mexico, and Turkey to smaller players like Nepal, Guatemala, and Kenya could cement their presence, keeping India out of crucial markets even if tariffs are eventually rolled back. For India, the road forks. Bilateral trade talks, if revived, could offer relief, possibly through concessions on farm imports like walnuts or almonds. Exporters may reroute goods through third countries, set up overseas plants, or pivot to other markets. But the shock, as of now, is real. Trump's punitive tariffs on Russian crude imports have pushed total US duties to levels Nomura calls "similar to a trade embargo." The US tariffs, now at 50 per cent -- 20 points higher than China, 31 points above Pakistan, mark one of the harshest barriers India has ever faced. If they persist, they could shave 0.4-0.5 per cent off GDP, hit millions of jobs, and lock India out of supply chains it has spent decades building. For now, all eyes are on whether diplomacy can mitigate this tariff blow, or whether India must brace for a long, painful trade war.

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