In 2025, India stands at the epicenter of a global trade storm, battered by escalating U.S. tariffs under President Donald Trump's America First agenda. From a 10 percent baseline tariff in April to a 50 percent duty on most goods by August 27 and a looming 100 percent tariff on pharmaceuticals from October 1, these measures target India's 86.5 billion dollar merchandise exports to its largest market. The fallout, projected at 37 to 48 billion dollars in export losses, threatens to shave 0.5 to 1 percent off India's 6.5 percent GDP growth for FY26, destabilize the rupee at 88.80 dollars per USD, and imperil 2 to 3 million informal jobs. The Indian stock market has bled 35 to 40 lakh crore rupees, or 420 to 480 billion dollars, with the textiles, gems, and seafood sectors reeling hardest.
Yet, India's response—diplomatic restraint, fiscal buffers, and diversification—signals resilience amid adversity. This analysis dissects the economic, market, and geopolitical implications, spotlighting industry voices and government countermeasures, while weaving in fresh insights from September 2025 developments, including restarted negotiations and China's vocal condemnation of the tariffs as unfair.
Economic Shockwaves: Sectoral Devastation
The tariffs have struck India's export-driven sectors with surgical precision, targeting labor-intensive industries that employ millions. Textiles and apparel, valued at 10 to 12 billion dollars to the U.S., face a 50 percent duty, risking 500,000 jobs in hubs like Tirupur, Tamil Nadu. Mithileshwar Thakur of the Apparel Export Promotion Council warns, "This is an earthquake. Indian exporters face a 30 percent cost disadvantage compared to Bangladesh, Vietnam, and Cambodia. Gems and jewelry, at 8 to 10 billion dollars, anticipate a 75 percent export collapse, with Surat's artisans facing unemployment."
Kirit Bhansali, Chair of the Gem and Jewellery Export Promotion Council, laments, "Devastation awaits. 175,000 workers could be hit, unraveling decades old supply chains."
Seafood, particularly shrimp at 2 to 3 billion dollars, has seen a 43.8 percent export drop, with Andhra Pradesh farmers desperate for subsidies. An exporter told Al Jazeera, "Coastal processing jobs are vanishing. Vannamei shrimp exports fell 52.2 percent from May to August. Pharmaceuticals, at 9 to 10 billion dollars, while spared on generics, face uncertainty from Trumps 100 percent branded drug tariff threat."
A Wockhardt executive remains defiant: "Zero impact on our U.S. plans. Generics hold strong. However, Rahul Ahluwalia of the Foundation for Economic Development cautions, A 200 percent tariff in two years could force production shifts to the U.S."
Electronics and auto parts, at 5 to 6 billion dollars, report a 22.2 percent export plunge, with 200,000 jobs at risk. Bharat Forge executive notes: "Precision parts demand is collapsing. Layoffs loom. Macro impacts are stark: a 0.5 to 1 percent GDP drag, 5 to 7 percent rupee depreciation, and 0.5 to 1 percent CPI inflation from costlier imports."
The current account deficit may widen by 1 to 2 percent of GDP, per GTRI estimates, straining India's 3.5 trillion dollar economy. Recent data from September 24 underscores the severity: India's exports to the U.S. plunged 22.2 percent to 6.9 billion dollars from May to August, per GTRI, as tariffs disrupt supply chains and push exporters toward ASEAN and Europe. Chief Economic Adviser V. Anantha Nageswaran now estimates a 0.5 percent GDP shave-off if tariffs persist, though GST reforms could offset 0.2 to 0.3 percent via consumption boosts.
Stock Market Meltdown: 40 Lakh Crore Wiped Out
The Indian stock market has endured its worst losing streak in five years, with the Nifty 50 and Sensex down 18 to 22 percent YTD from March 2025 peaks, and the Nifty from about 26,000 to 24,500. The April 3 tariff announcement sparked Black Monday, erasing 19 to 20 lakh crore rupees in a single session. August's 50 percent tariff escalation triggered further losses: 5 lakh crore on August 8, 4.14 lakh crore on August 28, cumulating in a 35 to 40 lakh crore rupee, or 420 to 480 billion dollar, market cap evaporation. FII outflows of 15 to 18 billion dollars fueled the rout, though domestic mutual fund inflows of 2.2 lakh crore cushioned 30 to 40 percent of losses. Volatility soared, with India VIX peaking at 28 in August.
Export-heavy stocks bore the brunt. Textiles (Trent and Gokaldas Exports) and seafood (Avanti Feeds and Apex Frozen) plummeted 20 to 30 percent, with Kitex Garments down 15 percent. Metals (Tata Steel) and autos (Bajaj Auto) shed 15 to 20 percent, while chemicals (SRF and Navin Fluorine) lost 8 to 12 percent.
Even IT giants like Infosys, down 12 percent, faltered on H-1B visa threats, despite service exemptions. Atul Keshap of the US-India Business Council warns, "Uncertainty is killing the 500 billion dollar bilateral trade target. 200 top companies are nervous. Defensives like FMCG rose 1 to 2 percent, but mid- and small-caps crashed 25 to 30 percent, amplifying retail investor pain across 200 million new accounts since 2020." By September 25, the rupee hit a record low of 88.80 dollars, dragging Nifty below 25,000 support amid FII selling and H-1B fee hikes to 100,000 dollars, per Bloomberg reports. HSBC's September 24 upgrade of India to overweight, eyeing Sensex at 94,000 by 2026, offers a counterpoint, citing policy positives amid tariff overhangs.
Geopolitical Ripples: A Delicate Balancing Act
The tariffs, framed as secondary sanctions over India's Russian oil purchases, strain U.S.-India ties despite Quad alignment. NATO's Mark Rutte claimed on September 25 that the pressure nudged PM Modi to urge Putin for Ukraine clarity, a claim India disputes.
Chris Sununu critiques, "Alienating India is a strategic blunder."
India's Chief Economic Adviser V. Anantha Nageswaran flags, "Protectionism poses extremely challenging risks to global trade. The stalled sixth round of U.S. trade talks underscores tensions, yet India avoids retaliation to preserve strategic ties. Fresh momentum emerged on September 24: the U.S. and India restarted negotiations in New York, with Commerce Minister Piyush Goyal signaling increased U.S. oil imports as a concession to lower tariffs."
China's Ambassador to India, Xu Feihong, slammed the 50 percent duties in August as bullying, urging Beijing-New Delhi cooperation, potentially driving a wedge in U.S. alliances while boosting South-South trade corridors. At the UNGA on September 23, Trump accused India and China of funding Russia's war via oil, threatening stronger tariffs, yet back-channel thaws hint at a November deal.
India's Response: Resilience Through Restraint
India's countermeasures blend diplomacy, fiscal relief, and diversification. PM Modi's stance, ready to pay a heavy price for sovereignty, rejects tariff concessions on Russian oil. Instead, India paused U.S. arms purchases, Stryker and Boeing, as leverage, though the MoD denies fabricated reports.
Trade Minister Piyush Goyal vows India will not bow down. "We're targeting EU, ASEAN, and BRICS markets. Fiscal moves include GST cuts on 100-plus goods. 5 lakh crore rupee MSME credit guarantees and suspended raw material duties. Export incentives and 25 to 50 percent duty drawbacks target seafood and textiles, while 1 lakh crore rupees in tax relief boosts consumption. The RBI holds the repo rate at 6.5 percent but signals 25 to 50 basis point cuts to counter rupee weakness. Accelerated FTAs, signed by the UK in July 2025 and in progress with the EU and ASEAN, aim to redirect 36 billion dollars in exports.
Kaushik Basu advocates that South-South corridors with Africa and ASEAN can reduce U.S. dependency. Make in India pushes electronics and pharma self-reliance, with 100 imported goods listed for PLI schemes. No H-1B retaliation preserves IT stability, but critics like Shashi Tharoor urge courage against U.S. demands.
On September 23, Tharoor highlighted the surprise tariffs post-Modi-Trump meeting, noting 48 billion dollars of exports now unviable, forcing diversification. SEBI's September easing of FPI rules and a 69,725 crore rupee shipbuilding package under Atmanirbhar further fortify domestic buffers.
The Road Ahead: Pain and Promise
India's 7.8 percent Q1 growth and 3.5 trillion dollar services exports provide buffers, but 2 to 3 million informal jobs remain vulnerable. Textiles and gems face existential threats, with Surat's exporters pleading, "We're scared of losing jobs. Supply chains are unraveling. Diversification to Europe and Africa offers hope, but competitors like Vietnam and Bangladesh gain ground. Prolonged tariffs risk a 1 percent-plus GDP hit and FDI flight, yet India's non-retaliatory stance buys time for fall 2025 talks."
Harsh Shringla's pivot, diverting exports from America, signals strategic autonomy. Amid de-dollarization signals, India's U.S. Treasury holdings fell to 227.4 billion dollars in June, with gold reserves surging to 880 metric tons, per economist Steve Hanke. UBS's September 25 downgrade of India to underweight among emerging markets cites tariff risks, yet WEF's outlook keeps India at 6.5 percent growth for 2025, the fastest major economy.
The tariff tempest tests India's economic mettle, exposing overreliance on the U.S., 18 to 20 percent of exports. Short-term pain, 40 lakh crore rupees in market losses, rising unemployment, and demands urgent relief. Long term, FTAs and Make in India could reshape India's trade map, balancing pain with promise. As global protectionism looms, India's resilience hinges on navigating this storm with pragmatism and vision, ensuring its 1.4 billion people weather the economic turbulence.
[Major General Dr Dilawar Singh is an Indian Army veteran who has led the Indian Army's Financial Management, training and research divisions introducing numerous initiatives therein. He is the Senior Vice President of the Global Economist Forum AO ECOSOC, United Nations and The Co President of the Global Development Bank.]
