Trump's 50% tariffs on Indian goods come into effect, experts see opportunities to diversify markets

New Delhi [India], August 27 (ANI): The 50 per cent tariffs on Indian goods imposed by the Donald Trump administration came into force on Wednesday, following a notice by the US Customs and Border Protection (CBP). The move poses serious challenges for India's US-oriented exporters.
According to an analysis by ICRIER, it exposes nearly 70 per cent of India's exports, worth USD 60.85 billion, to the elevated duties.
US President Trump, who has on several occasions described India as a "tariff king," and cited the trade deficit with India and New Delhi's continued purchases of Russian oil and military equipment as reasons for the move.
Meanwhile, Prime Minister Narendra Modi asserted that his government would shield small entrepreneurs, farmers, and livestock rearers.
During the recent Monsoon session of Parliament, Commerce and Industry Minister Piyush Goyal made a statement in both Houses, affirming that the government is examining the impact of tariffs and will take all necessary steps to safeguard the national interest.
While around 30.2 per cent of India's exports to the US, valued at USD 27.6 billion, will continue duty-free, including pharmaceuticals and electronics, and some others, the tariffs hit labour-intensive industries hardest.
Items such as iron and steel, aluminium products, passenger vehicles, semi-finished copper products, and critical minerals are exempt from the additional duties.
Ajay Srivastava, founder of the Global Trade Research Initiative (GTRI) said labour-intensive sectors, such as diamonds, gems, jewellery, textiles, garments, and shrimp, will be significantly impacted due to their high dependency on the US market and increased competition from countries with lower tariffs. Faced with the challenges, he noted that India can offset the loss of US trade to some extent through increased domestic consumption.
Industry Reactions:
Saiyam Mehra, Chairman of the All India Gem and Jewellery Domestic Council, warned that over 175,000 workers in Surat, Zaveri Bazaar, and Kolkata would feel the impact.
He noted that while exporters had anticipated the earlier 25 per cent tariff, the additional levy was unexpected. To cushion the blow, the industry is exploring opportunities in domestic markets and countries like the UAE, Saudi Arabia, and Qatar. He added that trade agreements with the UK and Australia were already helping and expressed hope that Washington might eventually reconsider the decision.
"However, we as manufacturers and wholesalers have made alternate routes by increasing our marketing throughout all the states in India, in the UAE, Saudi Arabia, Qatar and other markets also which we are looking at. The FTA that has happened between the UK and Australia is having a positive impact on the gem and jewellery industry, and we are hopeful that in the coming three to six months, we will be able to nullify the effect of the US; however, we are hopeful that good sense will prevail in the US, and Trump takes back the decision...," Mehra told ANI.
CTA Apparels Chairman Mukesh Kansal called the development unfortunate. He explained that looking for alternative markets was not easy. According to him, the immediate priority should be to cut production costs so exporters can absorb some of the tariff burden. Kansal expressed cautious optimism that the market might stabilize within six months.
Dinesh Navadiya, Chairman of the Indian Diamond Institute, said the diamond trade, being labour-intensive, would inevitably face difficulties. However, he highlighted that free trade agreements with the UK, UAE, and Australia, as well as potential openings in China and Russia, could create new opportunities for exporters.
"India's diamond industry is labour-intensive; It is expected to face difficulties... India's FTAs with the UK, UAE and Australia will help us find new markets. China and Russia have said that they will open their markets to India, which might prove to be a positive for us," said Navadiya.
Pankaj Chadha, Chairman of the Engineering Export Promotion Council of India, called the tariffs a major setback.
"This is a big jolt to the engineering exports sector, for which the US is the biggest market... It was hoped that India and the US would sign an interim trade deal... However, the recent developments on the trade front by the US have been very disappointing and disturbing," Chadha said.
Sanjay Nayar, President of ASSOCHAM, acknowledged the disruption but stressed India's resilience:
"Exporters across textiles, gems & jewellery, agriculture and shrimps face steep duties, yet they are accelerating diversification into Africa, Latin America, Europe and ASEAN, while strengthening competitiveness at home. With strong government support, this disruption will not weaken India's trade ambitions, it will only strengthen India's resolve toward resilience, self-reliance and global leadership," Nayar said.
Manish Singhal, Secretary General of ASSOCHAM, framed the tariffs as an opportunity. "The US tariff regime is not just a challenge but an opportunity for India to strengthen its role as a resilient and future-ready trading partner. By deepening partnerships with developed economies, diversifying markets, and advancing bold reforms, we are building a competitive and trusted economic ecosystem."
Harsha Vardhan Agarwal, President of FICCI, highlighted India's strong fundamentals. "Indian economy continues to demonstrate resilience and strength amid global headwinds, underpinned by a large and vibrant consumer base, robust macroeconomic fundamentals, continued economic reforms and enterprising businesses. The proposed next generation GST reforms announced by Hon'ble Prime Minister will give a further boost to India's growth."
Initially, US President Donald Trump announced 25 per cent tariffs on Indian goods, even as there were hopes of an interim India-US trade deal that would have otherwise helped avoid elevated tariffs. A few days later, he imposed another 25 per cent tariff, taking the total to 50 per cent, citing India's continued imports of Russian oil.
In contrast to India, competitors such as Vietnam (20 per cent), Bangladesh (18 per cent), Indonesia, Malaysia, and the Philippines (19 per cent), and Japan and South Korea (15 per cent) enjoy lower rates, as per reports.
Over the past few months, India and the US have been negotiating for an interim trade deal. Still, there are reservations from the Indian side on the US demand for opening up the agricultural and dairy sectors. Agriculture and dairy are critical for India as these two sectors provide livelihood opportunities to a large section of people.
India and the US initiated talks for a just, balanced, and mutually beneficial Bilateral Trade Agreement (BTA) in March this year, aiming to complete the first stage of the Agreement by October-November 2025.
US President Donald Trump had imposed reciprocal tariffs on dozens of countries with which the US has a trade deficit. Since assuming office for his second term, President Trump has reiterated his stance on tariff reciprocity, emphasising that his administration will match tariffs imposed by other countries, including India, to "ensure fair trade". (ANI)