India Braces for Higher Tariffs Wednesday
By Reuters | 26 Aug, 2025

To reduce the devastation expected from losing US sales the Indian government implements measures to support efforts to diversify exports to other nations.

Indian exporters are bracing for a sharp decline in U.S. orders after trade talks collapsed and Washington confirmed steep new tariffs on the South Asian nation's goods take effect from Wednesday, escalating tension between the strategic partners.

An additional 25% duty announced by President Donald Trump, confirmed in a notice by the Homeland Security Department, takes total tariffs to as much as 50%, among Washington's highest, in retaliation for New Delhi's increased buying of Russian oil.

"The government has no hope for any immediate relief or delay in U.S. tariffs," said a commerce ministry official, who sought anonymity for lack of authorisation to speak to media.

Exporters hit by tariffs would receive financial assistance and be encouraged to diversify to alternative markets such as China, Latin America and the Middle East, the official added.

However, the commerce ministry did not immediately respond to an email seeking comment on the latest notice.

The new duties will apply from 12:01 a.m. EDT on Wednesday (9:31 a.m. IST), it showed. Exceptions are shipments in transit, humanitarian aid, and items under reciprocal trade programmes.

The Indian rupee fell to a three-week closing low of 87.68 against the dollar, despite recovering some ground after suspected central bank intervention to support it. [INR/]

The benchmark equity indexes and closed down 1% each, for their worst sessions in three months. [.BO]

Wednesday's tariff move follows five rounds of failed talks, during which Indian officials had signalled optimism that tariffs could be capped at 15%.

Officials on both sides blamed political misjudgment and missed signals for the breakdown in talks between the world's biggest and fifth-largest economies, whose two-way trade is worth more than $190 billion.

White House trade adviser Peter Navarro and U.S. Treasury Secretary Scott Bessent have accused India of indirectly funding Russia's war against Ukraine by boosting Russian oil purchases.

This month Bessent said India was profiteering from its sharply increased imports, making up 42% of total oil purchases, versus less than 1% before the war, in a shift Washington has called unacceptable.

India has issued no directive yet on oil purchases from Russia. Companies will continue to buy oil on the basis of economics, three refining sources said.

EXPORTERS SEEK AID

Exporter groups estimate hikes could affect nearly 55% of India's merchandise exports worth $87 billion to the United States, while benefiting competitors such as Bangladesh, China and Vietnam.

"The U.S. customers have already stopped new orders," said Pankaj Chadha, president of the Engineering Exports Promotion Council. "With these additional tariffs, the exports could come down by 20% to 30% from September onward." 

The government has promised financial aid such as greater subsidies on bank loans and support for diversification in the event of financial losses, Chadha added.

"However, exporters see limited scope for diversifying to other markets or selling in the domestic market."

The commerce ministry official said the government had identified nearly 50 countries to which India could boost exports, particularly items such as textiles, food processed items, leather goods and marine products.

India's diamond industry exports have already hit a two-decade low on weak Chinese demand, and the higher tariffs now threaten to cut it off from its largest market, taking nearly a third of $28.5-billion annual shipments of gems and jewellery.

BROADER ECONOMIC IMPACT

Private sector analysts warn that a sustained 50% tariff could weigh on India's economy and corporate profits, prompting the steepest earnings downgrades in Asia, even if proposed domestic tax cuts partly cushion the blow.

Last week, Capital Economics said full U.S. tariffs would chip 0.8 percentage points from India's economic growth both this year and the next.

Foreign Minister S. Jaishankar also said trade talks continued and Washington's concern over Russian oil purchases was not equally applied to other major buyers such as China and the European Union.

The United States could be a major energy supplier to India, an official of its New Delhi embassy said on Tuesday. 

The United States is committed to collaborate with India on exports of high-quality products and services to help achieve energy security and economic growth, the official added. 

Prime Minister Narendra Modi has vowed not to compromise the interests of Indian farmers, even if it entails a heavy price. Modi is also moving to burnish ties with China, planning his first visit there in seven years at the end of the month.

(Reporting by Swati Bhat and Manoj Kumar; additional reporting by Nidhi Verma, Editing by Raju Gopalakrishnan and Clarence Fernandez)