Indian labour-intensive exports to the US are bracing for a sharp blow as President Donald Trump’s 50% tariff on Indian goods comes into effect from August 27, following confirmation by the US Department of Homeland Security. The new duties, effective 12:01 am EDT, are in addition to existing Most Favoured Nation (MFN) tariffs, pushing effective rates on many categories above 50%.
Key Impact on Indian Exports
According to government estimates, around $48.2 billion worth of Indian exports will be subject to higher duties, while $27.6 billion will remain exempt. However, think tank Global Trade Research Initiative (GTRI) expects a broader impact of $60.2 billion.
India exported goods worth $86.51 billion to the US in FY25, with the top five categories making up nearly $60 billion.
- Engineering goods ($19.16 bn) – Will face a 50% tariff; key raw materials like steel and aluminum are already taxed at this rate since April.
- Gems & Jewellery ($9.94 bn) – Effective tariff to rise to 52.1%.
- Ready-made garments ($5.33 bn) – Duties to jump to 63.9%, among the steepest across categories.
- Textiles & Apparel ($10.8 bn) – Sector-wide impact, led by garments and carpets. Carpets alone ($1.2 bn) will face 52.9% tariffs.
- Shrimps ($2.4 bn) – Total tariff to reach 60%.
- Leather, footwear, agriculture & processed food – Uniform 50% tariff.
- Organic chemicals – Effective rate of 54%.
- Machinery & mechanical appliances – 51.3% tariff, though US dependence here is lower.
- Auto components ($6.6 bn) – Of this, $3.4 bn (mainly small truck & car parts) will face 25%, with the rest at 50%.
Exemptions: Pharma, Tech and Petroleum
India’s second- and third-largest export categories remain unaffected for now:
- Electronics ($14.64 bn) – Exempt from tariffs.
- Drugs & Pharmaceuticals ($10.52 bn) – Spared from additional duties, safeguarding one of India’s strongest export segments.
Other exclusions include petroleum products ($4.1 bn), books, brochures, plastics, cellulose ethers, specific alloys such as ferromanganese, ferrosilicon manganese, ferrochromium, and IT hardware like motherboards and rack servers.
Outlook
While exemptions in pharma and tech offer relief, India’s labour-intensive sectors—textiles, garments, leather, gems, jewellery, seafood, and carpets—will be the hardest hit, facing effective tariffs well above 50%. These sectors account for millions of jobs and a large share of MSME-driven exports.
With the US being India’s largest export market, industry experts warn of severe disruption, potential job losses, and a push for India to diversify export destinations.
