In today’s world, tariffs are more than just taxes on imports—they’re powerful tools that can shape economies and international relations. Recently, the U.S. imposed a 50% tariff on Indian exports (earlier it was 25%), which is expected to seriously impact India’s economy, especially sectors that depend heavily on U.S. markets.
This Article explains what these tariffs mean for India’s economy, how major sectors like textiles and Apparels, gems & jewellery, and Seafoods etc. are affected, and the effects of Tariff on our Indian stock market.
Trade Dynamics with US
India’s goods exports to the U.S. rose to $87 billion in 2024, led by gems and jewellery ($8.5 billion), pharmaceuticals ($8 billion), and petrochemicals ($4 billion). In addition, services exports—primarily IT and professional services—totalled–– $33 billion ( there have been no reported tariffs on Indian service exports.).
In 2024, the U.S. exported $42 billion worth of manufactured goods to India. However, these products face high import tariffs—around 7% on wood products and machinery, 15–20% on footwear and transport equipment, and up to 68% on certain food items. .
Impact on the Indian Economy
According to CEIC data, Total India’s total exports to the USA were around USD 7.017 billion. In the past few years, exports from India to the US have increased significantly, as shown in the chart. However, this Increasing trend may be affected due to the new US tariffs.
These tariffs can affect the Indian economy in various ways—whether the impact is heavy or minimal. It is important to understand how much of an impact they may have, and which specific factors are most affected.
These impacts are discussed in detail below:
1) Impact on GDP Growth: On a Macroeconomic level, According to Goldman Sachs projects that the U.S. tariffs could reduce India’s GDP growth by 0.1 percentage points in 2025, and by 0.2% in 2026 lowering growth estimates to around 6.5% for 2025-26. ( Link of the Article )
RBI Governor Sanjay Malhotra said that US President Donald Trump’s tariffs on India would not have a major impact on the economy, but conditions apply or unless you have retaliatory tariff. ( Link of the Article )
2) Economic Threat to Exports: India’s exports could drop by as much as $64 billion because of new 50% tariffs imposed by the U.S. This loss is nearly 1.9% of India’s total GDP.
These tariffs started on August 7, 2025, and will increase to 50% on August 27, 2025.
Since the U.S. is India’s biggest export market (worth $87 billion in 2024), these high tariffs will make Indian products more expensive and less competitive in the U.S.
Sectors most at risk include:
=> Automobiles & parts
=> Steel & aluminium
=> Electronics & smartphones
=> Marine products
=> Gems, jewellery, and food items
3) Long Term Effects: Prolonged tariffs could hinder India’s ambition to become a global manufacturing hub, as businesses may shift to countries with lower tariffs, such as Vietnam or Bangladesh. However, India’s domestic-driven economy, with exports to the US accounting for only 2.2% of GDP, may have some impacts.
4) Unemployment Rate: The unemployment rate in the economy may increase as a decrease in exports leads to a loss of job opportunities.
Impact on the Sectors
The real impact will be sector-specific, hitting industries like Textile and Apparel Industry, Gems and Jewellery, automobile components, and possibly electronics.These sectors may face pricing disadvantages compared to competitors from Some of the countries like Vietnam, South Korea, and Indonesia, who benefit from lower tariffs.
There are Many Sectors in India in Which Most of are heavily Impacted or some few which minimal Impacted.
What Will Impact on Sectors?
The sector can face several serious impacts due to the US tariff hike and the current situation:
a) Revenue Decline: Increased tariffs lead to higher costs for Indian exporters, reducing their ability to price products competitively in the U.S. market, which results in decreased sales volume and export revenue.
b) Margin Compression: To maintain existing contracts, exporters may have to absorb additional tariff costs, leading to lower gross margins or even operating losses on US-bound shipments.
c) Increased Working Capital Strain: Reduced sales and delayed shipments may increase inventory holding periods, putting pressure on working capital management and liquidity.
d) Job Market Impact and Operational Risks: Potential layoffs and reduced production capacity could lead to operational inefficiencies and increased restructuring costs.
e) Competitive Disadvantage: Market share erosion relative to competitors from countries like Vietnam and Bangladesh may weaken long-term revenue growth prospects.
f) Macroeconomic and Regional Impact: Declines in export earnings can negatively affect regional GDP contributions and impact ancillary industries, increasing systemic financial risk within the sector.
g) Unsafe Sectors – textiles, footwear, furniture, and gems & jewellery: The immediate and most visible impact will be felt in traditional labour-intensive sectors like textiles, footwear, furniture, and gems & jewellery. These industries heavily rely on competitive pricing to thrive in global markets, especially the US. The sudden increase in tariffs will:
=> Make Indian goods more expensive for US buyers.
=> Affect order volumes and long-term contracts
h) Pharmaceutical Industry is Currently Safe: The Indian Pharmaceutical Industry Currently Exempted from Tariffs imposed by the US due to the importance of generic medicines for affordable healthcare in the United States.
As per Sudarshan Jain, Secretary General of the Indian Pharmaceutical Alliance Executive Order by the US Administration excludes the pharmaceutical sector from immediate tariff . The sector is being reviewed under the Section 232 investigation. Generic medicines are important for affordable healthcare in the US and typically operate on thin margins. Ensuring their consistent availability is critical for patient care. However, this exemption is not guaranteed long-term as Investigation is Under Process. ( Link of the Article )
i) IT Sector Is Out of the Game: Currently the $280-billion domestic IT Sector Industry may not be directly impacted by the recent tariffs imposed by the US on Indian exports. However analysts warn of second-order effects that could affect client sentiment, discretionary spending, and the flow of large deals.
Rohitashwa Aggarwal from Everest Group said that the new US tariffs on Indian exports don’t apply to IT, BPO, or digital services. That’s because these services are not physical goods, so they aren’t usually affected by trade restrictions. However, companies in industries hit by the tariffs might face higher costs. As a result, they may cut back on their IT spending—especially for non-essential or innovation-focused projects. ( Link of the Article )
The chart shows which industries or products in India will be most or least affected by U.S. tariffs.
| Industry | Exports to USA ($ bn, FY2025) | US Share in India’s Exports (%) | US MFN Tariff (%) | New Trump Tariff (%) | Total Tariff Payable (%) | Impact on India |
| Apparel; knitted | 2.7 | 34.5 | 13.9 | 50 | 64 | Very High |
| Apparel; woven | 2.7 | 32.2 | 10.3 | 50 | 60 | Very High |
| Chemicals (Organic) | ~2.34 | Not specified | ~0-10 (varied) | 54 | 54+ | High |
| Electrical & Mechanical Machinery | ~9.0 | Not specified | Varied | 50 | ~50 | High |
| Gems & Jewellery | ~12.0 | ~33 | ~5-10 | 50 | ~55-60 | Very High |
| Leather & Footwear | ~1.18 | Not specified | Varied | 50 | ~50+ | Very High |
| Pharmaceuticals | Significant | Not specified | Low to moderate | Low or exempted | Low | Low to Moderate |
| Seafood (Shrimp) | ~2.24 | Not specified | 2.49 + 5.77 (anti-dumping + countervailing) | 50 | ~58+ | Very High |
| Steel & Aluminium | Significant | Not specified | 25-30 | 50 | 50 | High |
| Textile & Made-ups | ~10.3 | Not specified | Aug-15 | 50 | ~58-60 | Very High |
| Automobile Components | ~6+ | ~32 | 02-May | 50 | ~50-55 | High |
| Renewable Energy | Growing segment | Not specified | NA | Indirect | NA | Moderate |
| Oil Refining | Moderate | Not specified | NA | Applied tariffs related to Russia imports | NA | Moderate |
Source : GTRI Analysis based on DGCI&S data and US Tariff notifications ( Link of the Article )
Impact in the Indian Financial Markets
If the U.S. imposes 50% tariffs on imports, it would be a big negative for Indian exports. Here’s how it may affect the Indian stock market:
Key Impacts:
1.) Export Companies Hit
Companies involved in the business of textiles, footwear, furniture, and gems & jewellery may face pressure on their profit margins, which could directly impact their Earnings. Exporters of pharmaceuticals, auto parts, and textiles may become less competitive and could experience a drop in sales, potentially resulting in a fall in their stock prices. IT companies (like TCS and Infosys) may also come under pressure if the U.S. becomes less open to outsourcing
2.) Foreign Investors May Pull Out
=> Big tariff news can scare foreign investors.
=> This could lead to FII selling, causing the Nifty and Sensex to fall.
3.) Rupee May Fall
=> Lower exports = less dollar inflow.
=> Rupee could weaken, increasing import costs
4.) Domestic-Focused Stocks Are Safer
=> Sectors like FMCG, telecom, utilities may do better because they rely more on Indian demand.
5.) Long-Term Opportunity
=> If U.S. tariffs target China more, India could gain from supply chain shifts over time.
=> This may help manufacturing and chemical sectors in the long run.
Conclusion
In the short term, the tariffs imposed by the US can clearly impact India’s GDP and the revenues of companies that are heavily dependent on exports. If these tariffs directly affect the future earnings of such companies, it could significantly hit the Indian market.
We may also see short-term volatility in the stock market due to negative investor sentiment and a weakening rupee. Export-oriented stocks are likely to be the most affected. Additionally, there could be a shift in global supply chains.
In the long term, the situation might improve, but there is still a lot of uncertainty ahead.
Lets Wait & see how the Market Behaves.