The United States has officially announced a 50% tariff on Indian goods, with the new rates effective August 27, 2025. This substantial increase in duties, stemming from Executive Order 14329 signed on August 6, 2025, is a direct response to India's continued imports of Russian oil, escalating trade tensions between the two nations. The U.S. Department of Homeland Security, through U.S. Customs and Border Protection (CBP), released the notice on August 25, 2025.
The levies apply to goods entered for consumption or withdrawn from warehouses on or after 12:01 a.m. Eastern Daylight Time on August 27, 2025. This move impacts approximately 66% of India's annual exports to the U.S., valued at around $60.2 billion out of a total of $87 billion in FY25. Labor-intensive sectors such as textiles, gems and jewelry, leather, seafood, and furniture are expected to be hit the hardest.
Industry experts and exporters anticipate severe repercussions, with projections suggesting a potential 70% decline in exports from these affected sectors. This could translate into substantial job losses, impacting millions of livelihoods. The Global Trade Research Initiative (GTRI) estimates that India's product exports to the U.S. could fall to $49.6 billion in FY26 from $87 billion in FY25. Some product categories could see effective tariff rates exceeding 60%.
While sectors such as pharmaceuticals and electronics have been granted exemptions, the broad scope of the new tariffs is causing significant concern. Major competing nations like Bangladesh, Vietnam, Sri Lanka, Cambodia, and Indonesia, which currently face lower tariffs, are poised to benefit from India's potential losses.
In response to the escalating trade dispute, India is actively exploring alternative markets and strengthening its economic ties with Russia. Prime Minister Narendra Modi has affirmed India's commitment to its national interests, stating that the nation will withstand external economic pressure and continue to prioritize domestic producers. The government is also considering policy reforms to bolster economic confidence and resilience.
The U.S. rationale for these tariffs is rooted in penalizing India for its continued purchase of Russian oil, which the U.S. views as indirectly financing Russia's war efforts. This action is part of a broader U.S. strategy to exert economic pressure on Russia. While India maintains its right to secure energy for its economic stability, the trade implications are profound, potentially reshaping global trade dynamics and energy market flows. The situation remains fluid as discussions continue between the two nations to navigate this complex trade standoff.