Additional 25% US tariffs kick in today, textiles to take hit

Indian goods imported into the US will attract 50 per cent tariff as the additional 25 per cent Trump tariff slapped as a penalty for the purchase of Russian crude oil kicks in on Wednesday.

The US Department of Homeland Security on Tuesday issued a notification confirming the imposition of 25 per cent additional tariff on Indian goods. The US tariff will severely impact labour-intensive sectors such as textiles, gems and jewellery, shrimp and carpets.

The Trump administration accused New Delhi of imposing “Maharaja tariff”, which is allegedly responsible for US’ over $40-billion trade deficit with India, and of financing Russia’s war efforts in Ukraine. The US has objected to India’s crude oil purchase from Russia, which significantly increased after the Ukraine war. According to government data, India imported around 1.8 million barrels per day of Russian crude oil, valued at approximately $49 billion in 2024.

The 25 per cent additional tariff will be over and above the existing 25 per cent reciprocal tariff that imports from India have been subjected to by the US since August 7.

While the Ministry of Commerce and Industry has not given any official response to the development yet, officials said the government was considering financial assistance to exporters hit by the tariff, besides encouraging market diversification.

The stock market experienced a significant downturn following the confirmation of the additional 25 per cent tariff. The Sensex ended at 80,786.54, down 849.37 points or 1.04 per cent. The Nifty settled at 24,712.05, down 255.70 points or 1.02 per cent.

Trade experts projected that the tariff may slash India’s exports to the US to $49.6 billion in the current financial year, 43 per cent down from $86.5 billion in the last fiscal.

Federation of Indian Export Organisations (FIEO) president SC Ralhan termed the US tariff a setback, adding that it could severely impact India’s exports to the US. He said approximately 55 per cent of India’s US-bound shipments (worth $47-48?billion) were now exposed to pricing disadvantages of 30 to 35 per cent, rendering these uncompetitive in comparison to its competitors from China, Vietnam, Cambodia, the Philippines and other southeast and South Asian countries.

“Textiles and apparel manufacturers in Tirupur, Noida and Surat have halted production amid worsening cost competitiveness. This sector is losing ground to lower cost rivals from Vietnam and Bangladesh. As far as seafood, especially shrimps, is concerned, the tariff increase risks stockpile losses, disrupted supply chains and farmer distress. The US market absorbs nearly 40 per cent of Indian seafood exports,” the FIEO president said.

The experts also estimated a significant impact on the GDP growth of the country. According to Global Trade Research Initiative (GTRI), the tariff may impact India’s GDP growth in the current financial year by nearly 100 basis points. However, diversified export base, robust services sector and policy responses will enable the country to withstand the shock and continue on its growth trajectory, Ajay Srivastava of the GTRI said.

The additional tariff follows five rounds of failed talks between the two sides. The India-US Bilateral Trade Agreement was announced in February this year, with an aim to enhance trade and investment ties targeting doubling of bilateral trade to $500 billion by 2030.

So far, five rounds of talks have concluded and a US team was scheduled to visit India on August 25 for the sixth round of talks. However, the US team postponed the visit amid tensions over tariff and Russian oil imports.