Major disruption for Indian exports to the US with a 50% tariff
Major disruption for Indian exports to the US with a 50% tariffStrap: About 55% of exports to be rendered uncompetitive, exporters seek government, RBI support
- Aug 26, 2025,
- Updated Aug 26, 2025 5:18 PM IST
With orders from the US drying up with the imposition of the 50% tariff, exporters are hoping for support from the government and the Reserve Bank of India to tide over challenges of working capital and diversify markets.
The US Department of Homeland Security has notified an additional 25% tariff on India for buying Russian oil, taking the total tariff on select Indian goods to 50% with effect from August 27. Pharma, APIs and electronics continue to remain exempt from these tariffs but roughly 555 of Indian exports are now subject to these levies.
According to exporters, this translates into a price differential of anywhere between 30%-35% vis-a-vis competitors such as Vietnam, Turkey, and European Union on whom the US has levied much lower tariffs.
“In most cases where the 50% tariff applies, there will be no exports from India unless there is a huge margin for the company that is importing. Most exports from India will be hit,” said Ajay Sahai, Director General and CEO, Federation of Indian Export Organisations (FIEO).
In a statement, FIEO President SC Ralhan said there is need for immediate government support which includes push for interest subvention schemes and export credit support to sustain working capital and liquidity. “To further support this, low cost of credit and easy availability of credit with emphasis on MSMEs with the support from banks and financial institutions with special direction in this regard both from the government and the Reserve Bank of India is needed”, he said.
Sahai also underlined that there is a need to provide banking support to exporters in terms of moratorium on loan and interest payments as well as collateral free lending that would help tide over working capital challenges.
The Reserve Bank of India is likely to meet exporters next week to discuss possible measures to help them in the wake of this setback.
Pankaj Chadha, President, EEPC India said about 50% of the sector’s exports of about $15 billion will be hit due to the tariffs. “About $7 billion of engineering exports will be impacted. We will try and diversify our markets, which would help makeup by about $ 1 billion. But there would still be a $6 billion hit,” he said, adding that there have been no orders from the US since the 50% tariff was first announced.
The Confederation of Indian Textile Industry (CITI) also said it is hoping for immediate upfront support coming in from the government.
“The government has been discussing with industry on how it can come to our aid during this critical juncture. But given the gravity of the situation, it is our expectation that concrete measures in the form of fiscal support and policy decisions related to raw material availability would be taken immediately,” CITI Chairman Rakesh Mehra said, adding that Indian textile companies are already engaged in diversification efforts to reduce their dependence on the US market.
Textiles and apparel manufacturers in Tirupur, Noida, and Surat have halted production amid worsening cost competitiveness, FIEO said, adding that labour-intensive sectors of exports leather, ceramics, chemicals, handicrafts and carpets, the industry faces a sharp erosion of competitiveness, particularly against European, South East and Mexican producers.
India’s exports to the US are set to fall steeply—from $86.5 billion in FY2025 to about $49.6 billion in FY2026—due to Washington’s new tariff regime, warned a report by GTRI. “While 30% of exports ($27.6 billion) will remain duty-free and 4% ($3.4 billion, mainly auto parts) will face a 25% tariff, the bulk—66% ($60.2 billion) covering apparel, textiles, gems and jewellery, shrimp, carpets, and furniture—will be hit with a 50% tariff, rendering them uncompetitive,” it said, adding that txports from these sectors could plunge 70%, dropping to $18.6 billion, causing an overall 43% decline in shipments to the US and endangering hundreds of thousands of jobs.
The government too is trying to offset the impact of the US tariffs by measures such as rate rationalisation of goods and services tax in a bid to boost domestic demand.
It is also working on a strategy to promote exports, which include fast tracking of free trade agreement negotiations, expanding focus to top 50 importing countries and exploring new markets and new products for exports.
With orders from the US drying up with the imposition of the 50% tariff, exporters are hoping for support from the government and the Reserve Bank of India to tide over challenges of working capital and diversify markets.
The US Department of Homeland Security has notified an additional 25% tariff on India for buying Russian oil, taking the total tariff on select Indian goods to 50% with effect from August 27. Pharma, APIs and electronics continue to remain exempt from these tariffs but roughly 555 of Indian exports are now subject to these levies.
According to exporters, this translates into a price differential of anywhere between 30%-35% vis-a-vis competitors such as Vietnam, Turkey, and European Union on whom the US has levied much lower tariffs.
“In most cases where the 50% tariff applies, there will be no exports from India unless there is a huge margin for the company that is importing. Most exports from India will be hit,” said Ajay Sahai, Director General and CEO, Federation of Indian Export Organisations (FIEO).
In a statement, FIEO President SC Ralhan said there is need for immediate government support which includes push for interest subvention schemes and export credit support to sustain working capital and liquidity. “To further support this, low cost of credit and easy availability of credit with emphasis on MSMEs with the support from banks and financial institutions with special direction in this regard both from the government and the Reserve Bank of India is needed”, he said.
Sahai also underlined that there is a need to provide banking support to exporters in terms of moratorium on loan and interest payments as well as collateral free lending that would help tide over working capital challenges.
The Reserve Bank of India is likely to meet exporters next week to discuss possible measures to help them in the wake of this setback.
Pankaj Chadha, President, EEPC India said about 50% of the sector’s exports of about $15 billion will be hit due to the tariffs. “About $7 billion of engineering exports will be impacted. We will try and diversify our markets, which would help makeup by about $ 1 billion. But there would still be a $6 billion hit,” he said, adding that there have been no orders from the US since the 50% tariff was first announced.
The Confederation of Indian Textile Industry (CITI) also said it is hoping for immediate upfront support coming in from the government.
“The government has been discussing with industry on how it can come to our aid during this critical juncture. But given the gravity of the situation, it is our expectation that concrete measures in the form of fiscal support and policy decisions related to raw material availability would be taken immediately,” CITI Chairman Rakesh Mehra said, adding that Indian textile companies are already engaged in diversification efforts to reduce their dependence on the US market.
Textiles and apparel manufacturers in Tirupur, Noida, and Surat have halted production amid worsening cost competitiveness, FIEO said, adding that labour-intensive sectors of exports leather, ceramics, chemicals, handicrafts and carpets, the industry faces a sharp erosion of competitiveness, particularly against European, South East and Mexican producers.
India’s exports to the US are set to fall steeply—from $86.5 billion in FY2025 to about $49.6 billion in FY2026—due to Washington’s new tariff regime, warned a report by GTRI. “While 30% of exports ($27.6 billion) will remain duty-free and 4% ($3.4 billion, mainly auto parts) will face a 25% tariff, the bulk—66% ($60.2 billion) covering apparel, textiles, gems and jewellery, shrimp, carpets, and furniture—will be hit with a 50% tariff, rendering them uncompetitive,” it said, adding that txports from these sectors could plunge 70%, dropping to $18.6 billion, causing an overall 43% decline in shipments to the US and endangering hundreds of thousands of jobs.
The government too is trying to offset the impact of the US tariffs by measures such as rate rationalisation of goods and services tax in a bid to boost domestic demand.
It is also working on a strategy to promote exports, which include fast tracking of free trade agreement negotiations, expanding focus to top 50 importing countries and exploring new markets and new products for exports.