US Tariffs On Indian Goods Rise To 50%: Which Sectors Will Be Hit Hardest?
Moody’s cautioned that while some exporters might cut prices to sustain order volumes, this strategy could erode margins, limit wage growth, and restrict investment.
As the United States implemented double tariffs on Indian goods from August 27, several sectors are bracing for impact. Labour-intensive industries such as textiles, gems and jewellery, and seafood exports are expected to face moderate to severe pressure, while areas like pharmaceuticals, smartphones and steel are likely to remain relatively insulated owing to exemptions, existing tariff frameworks, and robust domestic demand.
$45 Billion Trade at Stake, Warns SBI Report
According to a report by SBI Research, the US tariffs could affect American GDP by 40–50 basis points, alongside fuelling higher input cost inflation, reported IANS. “As $45 billion of export will be impacted due to 50 per cent tariffs, at worst scenario, India’s trade surplus will convert to trade deficit. However, we believe trade negotiations will restore confidence and improve export to US,” the report noted.
India’s loss of price competitiveness may benefit other Asian economies. The report highlights that the US has imposed steeper tariffs on India compared to countries such as China (30 per cent), Vietnam (20 per cent), Indonesia (19 per cent) and Japan (15 per cent), potentially redirecting orders to these nations.
Moody’s Warns of Falling Demand
An analysis by Moody’s Analytics has warned that the new tariffs could sharply curtail demand for Indian exports, reported India Today. “The drop in sales to their largest client will hurt,” the report noted, adding that tariffs have left Europe and Asia-Pacific “feeling bruised” as the US remains a key trading partner for many nations. Moody’s also cautioned that while some exporters might cut prices to sustain order volumes, this strategy could erode margins, limit wage growth, and restrict investment, ultimately weighing on business performance.
Textiles and Jewellery Exporters Brace for Disruption
The US is India’s largest export destination for textiles, a sector where India has steadily increased its market share over the past five years while China’s presence has weakened. “This shift highlights India’s growing importance in US supply-chain arrangements,” the SBI report mentioned.
For the gems and jewellery segment, which ships goods worth $28.5 billion annually, the US accounts for nearly a third of all exports. With tariffs jumping from 25 per cent to 50 per cent, the industry is preparing for significant turbulence.
Shrimp Exports At Risk
Shrimp exporters are also vulnerable, as over half of India’s output is sent to the US. Industry representatives fear steep losses and widespread order cancellations, which could make Indian seafood less competitive against suppliers like Ecuador.
Pharma Exemptions Offer Relief
In contrast, the pharmaceutical sector remains unaffected. The US has exempted drug imports from India, which currently holds a 6 per cent share in America’s total pharma imports. Notably, 40 per cent of India’s pharmaceutical exports head to the US, providing crucial support to the trade relationship despite the tariff tensions.
Inflationary Ripple in the US Economy
Meanwhile, the US economy is expected to see renewed inflationary pressures, fuelled by the pass-through impact of tariffs and a weakening dollar. Import-heavy sectors such as electronics, automobiles, and consumer durables could face rising costs, with analysts projecting inflation to stay above the Federal Reserve’s 2 per cent target through 2026.
Strategic Ties Under Strain
Beyond trade, analysts warn that tariff tensions risk spilling over into geopolitics. Washington has sought to deepen ties with New Delhi through initiatives such as the Quad, a strategic grouping that includes Australia and Japan to counterbalance China. Earlier this year, Foreign Minister S Jaishankar reiterated India’s commitment to bolstering the Quad’s defence and security role. However, the sudden escalation in tariffs could complicate these efforts, adding friction to an otherwise strengthening partnership.
Meanwhile, the United States itself faces growing inflationary pressures from higher import costs and a weakening dollar. Analysts expect US inflation to stay above the Federal Reserve’s 2 per cent target well into 2026, with price pressures felt across electronics, automobiles, and consumer goods.
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