Indian exports to the US will face a tax of up to 50% from August 27, unless US President Donald Trump makes a last-minute reversal.
The decision comes from New Delhi continuing to import Russian oil, which Washington said helped Moscow finance the conflict in Ukraine.
The US is currently India's largest export market with a turnover of 87.3 billion USD in 2024. Analysts warn that the new tax rate is equivalent to a "commercial embargo", which could make many small Indian businesses struggle because of thin profit margins. Ms. Garima Kapoor of Elara Securities Securities Securities commented that no Indian product will maintain a competitive advantage before this high tax rate.
According to the forecast, India's GDP may decrease by 70 - 100 basis points in the current fiscal year, bringing the growth rate below 6%, the lowest level since the pandemic. The textile, seafood and jewelry industries have recorded canceled orders from the US, creating opportunities for rivals such as Bangladesh and Vietnam, and raising concerns about mass layoffs.
Some areas are temporarily exempted such as pharmaceuticals and electronics, including iPhones assembled in India. However, S&P estimates that taxable goods still account for 1.2% of India's GDP, and although the impact is considered a "temporary shock", the short-term pressure is huge.
Tensions have risen after the White House accused India of playing the role of the global payment center for Russian oil, turning the embargoed crude oil into a high-value export product, thereby providing foreign currency to Moscow. Trade adviser Peter Navarro wrote in the Financial Times that Indian refineries are profiting from the situation.
Indian Foreign Minister Subrahmanyam Jaishankar responded, saying that oil purchases help stabilize the global market and have been tacitly approved by Washington since 2022. He stressed that both the US and Europe are importing refined oil from India: "If you don't want to buy, don't buy, no one is forcing you."
According to expert Nandan Unnikrishnan of the Observer Research Foundation, India is in a " situation with no way out" and needs a lot of skill to escape the pressure. He said Washington considers New Delhi the weakest link in the Russia-Ukraine geopolitical chain.
