U.S. Tariffs Impact India's $87B Export Market

On August 27, 2025, India faced a major economic jolt when U.S. President Donald Trump imposed a steep 50% tariff on Indian imports. This was a direct response to India’s decision to continue buying Russian oil amid global tensions. The tariffs, split into a 25% standard duty and an additional 25% penalty, have disrupted India’s $87 billion export market to the U.S., hitting sectors like textiles, gems and jewellery, pharmaceuticals, and seafood hard. This article explores the economic fallout, the Indian government’s strong push for self-reliance and the “Made in India” campaign, and how these efforts aim to support workers and small businesses.

Why the U.S. Tariffs Hurt

The U.S. tariffs are not just about trade; they’re tied to global politics. India has been purchasing discounted Russian oil, especially since the Ukraine war drove up energy prices. This has helped stabilise global fuel costs, but the U.S. is unhappy, viewing India’s oil trade as indirectly supporting Russia. External Affairs Minister S. Jaishankar said it clearly at a recent forum: “If you don’t like it, don’t buy it.” India’s standing firm, but it’s paying a price. The tariffs affect $48.2 billion of Indian exports, nearly half of what we send to the U.S. annually.

These tariffs are part of a larger U.S. strategy to push countries away from clean energy and back to coal, oil, and gas. India also faces added pressure, like visa restrictions and port fees, for backing global agreements to reduce shipping emissions. It’s a tough position, with the U.S. using its economic clout to influence India’s choices.

The Economic Impact: Industries Struggling

The tariffs have hit India’s key industries hard. Textiles, which account for 2% of our formal economy and employ millions, are in serious trouble. Factories in places like Uttar Pradesh and Tamil Nadu report U.S. orders drying up as buyers shift to cheaper options in Vietnam and Bangladesh. The Confederation of Indian Textile Industry estimates a 30-45% loss in U.S. market share next year, leading to billions in losses and lakhs of jobs at risk.

The gems and jewellery sector, a major global player, is also struggling. Our polished diamonds are now too costly for U.S. buyers. Seafood exports, like shrimp, face cancelled contracts, with the U.S. making up 40% of that market. Even pharmaceuticals, where India leads in affordable generics, are dealing with higher costs that could weaken our global edge.

The bigger picture is concerning. The Federation of Indian Export Organisations predicts a 45% drop in exports, which could slow economic growth, reduce jobs, and strain foreign exchange reserves. Small and medium businesses, the backbone of our exports, are especially at risk. Many lack the funds to handle this crisis, and some may shut down without quick support.

The Indian Government’s Response: Betting on “Made in India”

The Indian government is responding with determination, focusing on self-reliance, or Aatmanirbhar Bharat, and urging everyone to support “Made in India” products. In a recent speech, the government called the tariffs a chance to “prove India’s strength.” It’s a call to buy local, boost our industries, and rely less on foreign markets.

To support this, the government launched a Rs 2.3 lakh crore package over six years to help exporters. This includes funds to explore new markets, low-cost loans to keep businesses running, and support for modernizing factories. The government also simplified GST, reducing tax slabs from four to two starting October 2025, to ease the burden on businesses and consumers. There are also tax breaks and cheaper electricity for industries, especially in states like Gujarat and Tamil Nadu.

The government is also firm on protecting farmers and small businesses. The U.S. wants India to open its agriculture and dairy markets, but farmers are ready to protest if this happens, remembering the massive agitations of 2020-21. The government’s backing their stand, even if it risks more U.S. pressure.

Supporting Our Workers

The government’s “Made in India” campaign is a big win for industrial workers. By pushing local production, it ensures steady demand for jobs, even with the U.S. tariffs. The Aatmanirbhar Bharat plan, started in 2020, focuses on creating work in manufacturing, textiles, and other sectors. With U.S. exports hit, this focus on domestic markets means factories can keep running without laying off workers.

In textiles, where lakhs of jobs are at risk, the government’s Rs 20,000 crore scheme for stressed businesses helps factories keep workers employed. There’s also a strong emphasis on training, so workers can learn new skills, like using advanced machinery. This isn’t just about saving jobs—it’s about preparing workers for better opportunities down the line.

This approach also helps workers in smaller towns and villages. By spreading manufacturing beyond big cities, jobs are reaching places like Tiruppur or Surat, giving people a chance to earn a decent living. It’s about making sure India’s growth reaches everyone, not just city folks.

Helping Small Businesses Thrive

Small and medium businesses, or SMEs, are vital to India’s economy, and the government’s plan is designed to keep them strong. These businesses often lack the resources to adapt quickly when exports take a hit. The Aatmanirbhar package offers easy loans, credit guarantees, and equity support for up to 2 lakh SMEs, helping places like a textile unit in Coimbatore or a jewellery workshop in Jaipur stay afloat.

The “Made in India” push creates a bigger market at home, so SMEs don’t have to depend only on exports. For instance, a pharma company making generic medicines can sell more to Indian hospitals, making up for U.S. losses. GST cuts and tax breaks lower costs, letting SMEs compete better and maybe even grow.

The government’s focus on local production also encourages SMEs to innovate. They’re being nudged to make products we usually import, like electronics or chemicals. This saves money and opens new doors for small entrepreneurs. It’s like telling SMEs, “You can shine right here at home.”

The Political Side: A Balancing Act

The tariffs have sparked criticism of the government’s foreign policy. The Congress party says the tough stance on Russia has cost India dearly, warning that the economic hit could push millions into poverty. Other parties want the government to negotiate with the U.S. to ease the tariffs, fearing long-term damage.

But the government’s holding firm, banking on support from rural voters who back its stand on protecting farmers and small businesses. By framing the tariffs as a chance to build a stronger India, it’s turning a crisis into a story of national pride. It’s a risky move, but it’s resonating with many.

India’s Place in the World

The tariffs highlight India’s tricky position globally. Buying Russian oil has kept our energy costs down and helped global markets, but it’s upset the U.S. The government’s clear: India won’t be pushed around. This has strengthened ties with Russia, with trade hitting new highs in 2024. But it’s strained relations with the U.S., with trade talks breaking down after a cancelled meeting in Delhi in August 2025.

To counter this, India’s looking to new markets. China, despite past tensions, is a huge opportunity for textiles and medicines. Japan, with its demand for quality, is another focus. The European Union, which aligns with India on climate issues, is a promising partner, with trade talks gaining momentum. The Middle East, especially the UAE and Saudi Arabia, is also a target for jewellery and seafood exports.

Challenges in Key Sectors

Textiles: Innovating to Survive

Textiles employ 45 million people, and the U.S. tariffs are a major blow. Factories in Tiruppur report 40% fewer U.S. orders. The government’s providing subsidies to keep workers employed and cheaper power to cut costs. But the long-term fix is upgrading factories with automation and training workers for high-tech roles to stay competitive.

Agriculture and Dairy: Standing with Farmers

The U.S. wants access to our agriculture and dairy markets, but farmers are ready to hit the streets if this happens, as they did in 2020-21. The government’s supporting their resolve to protect their livelihoods, even if it risks more U.S. tariffs on crops like rice and spices.

Medicines and Seafood: New Markets

Pharmaceuticals are facing higher costs but holding steady due to demand for generics. Seafood exporters, hit hard by U.S. losses, are eyeing Europe and Southeast Asia, though matching U.S. prices is tough.

Looking Ahead: Opportunities and Challenges

Diversifying trade isn’t easy. New markets like China and Japan require big investments in marketing and logistics, which small businesses may find hard. Plus, we’re up against countries like Vietnam, who are ahead in the game. But if we succeed, it could make India less reliant on any single country.

The Bigger Picture: A Stronger India

The tariffs are a setback, potentially slowing growth, raising prices, and delaying our $5 trillion economy goal by 2027. But the government’s “Made in India” vision is a chance to rethink our approach. By investing in local industries, training workers, and supporting small businesses, India can emerge stronger. It’s like facing a tough bowler in cricket—you don’t give up; you play smarter.

The U.S. tariffs of August 2025 are a challenge, but the Indian government’s focus on “Made in India” is a plan to protect workers, empower small businesses, and make India stand tall. It’s a tough journey, but with unity, we can show the world what India’s capable of.