US Slaps 50% Tariffs on Indian Goods After Talks Collapse

Indian exporters are preparing for a decline in US orders after trade talks broke down and Washington confirmed that new tariffs on Indian goods will take effect on Aug. 27. An additional 25% duty announced by President Donald Trump brings total tariffs to as high as 50%, putting them among the highest imposed by Washington.

Tariffs came in retaliation for India’s increased purchases of Russian oil. Officials in New Delhi said there is little expectation of relief, though exporters hit by tariffs will receive financial assistance and be encouraged to diversify into alternative markets such as China, Latin America and the Middle East.

The new tariffs exclude shipments already in transit, humanitarian aid, and reciprocal trade program items. The Indian rupee fell to a three-week low against the US dollar, while equity markets closed down 1%, their weakest performance in three months. 

The decision follows five failed rounds of talks, where Indian negotiators had hoped to cap tariffs at 15%. Both sides blamed misjudgments for the collapse in negotiations, even as two-way trade between the United States and India exceeds US$190 billion. US officials have also accused India of indirectly supporting Russia’s war in Ukraine through sharply increased oil imports, which now make up 42% of India’s total compared with less than 1% before the invasion.

Exporter groups estimate the tariff hikes could impact more than half of India’s US$87 billion in merchandise exports to the United States, threatening industries from textiles and processed foods to leather, marine products and gems. The diamond sector, already suffering from weak Chinese demand, faces particular strain, with the United States as its largest market.

Economists warn that sustained tariffs at 50% could cut up to 0.8 percentage points from India’s economic growth this year and next. Prime Minister Narendra Modi has pledged to defend India’s farmers’ interests, even at significant cost, while also seeking to strengthen ties with China, with a visit planned later this month.