As US President Donald Trump’s sweeping new trade tariffs ripple across the globe, India — now the world’s fourth-largest economy — is grappling with a fresh economic shock: an additional 25 per cent tariff on its exports to the United States, bringing the total duty on several Indian products to 50 per cent.
While the punitive measure is a response to New Delhi’s continued oil trade with Russia, analysts and policy thinkers are debating whether this moment, fraught with economic risks, could also be a once-in-a-generation opportunity for India to reform and reimagine its export competitiveness.
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The secondary tariff, effective August 27, targets India along with only two other nations — China and Turkey. Washington has justified the action by citing India’s strategic crude oil imports from Moscow. Ironically, the US had previously encouraged India to tap alternative suppliers amid the war in Ukraine to ensure global energy stability.
India’s Foreign Ministry has strongly condemned the new tariff as “unfair, unjustified, and unreasonable”, noting that such a measure contradicts prior US policy stances. Nevertheless, the implications are real and immediate. The Confederation of Indian Textile Industry (CITI) has warned that the new duties will significantly weaken Indian exporters’ ability to compete in the US market — one of the country’s largest trading partners.
The US accounted for around $85 billion worth of Indian exports in 2024, with key sectors including textiles, garments, gems and jewellery, shrimp, chemicals, and leather goods forming the bulk of the trade. The textile industry alone exports nearly $4 billion to the US annually. With the new tariff, margins are expected to collapse, especially as competitors such as Bangladesh, Vietnam, and Ecuador enjoy significantly lower or zero-duty access.
Shrimp exports — already under the strain of a 2.49 per cent anti-dumping duty and a 5.77 per cent countervailing duty — will now see total levies rise to 33.26 per cent, according to Yogesh Gupta, managing director of Kolkata-based Megaa Moda. “This will make Indian shrimp uncompetitive in the US, where Ecuador has only a 15 per cent tariff,” he said, adding that many US buyers are already reconsidering their sourcing strategies.
Speaking to media, Shaji Baby John, chairman of Kings Infra, a major shrimp exporter, and a pioneer in the seafood and aquaculture business, said in an age of fragmented globalisation and weaponised trade, India’s challenge is no longer just about export recovery. “It’s about positioning itself as a resilient, agile, and reform-ready economy in an uncertain world. If New Delhi plays its cards right, what appears today as a punitive setback may indeed become the catalyst for its next leap forward.”
Baby John said the move should serve as a wake-up call to strengthen indigenous capacities and reduce strategic vulnerabilities. “For India, this is a time to double downs on long-term reforms and localised value chains.”
Colin Shah, managing director of Kama Jewelry, said that around 55 per cent of India’s exports to the US will be directly affected. “The 50 per cent reciprocal tariff places our exporters at a 30–35 per cent disadvantage compared to peers. Many orders are on hold, and for MSMEs, absorbing this cost is simply unviable,” he cautioned.
While immediate reactions in India’s financial markets were subdued — the rupee closed marginally stronger at 87.69 against the dollar and the Sensex dipped just 0.8 per cent — there is little doubt that prolonged tariff pressure could erode business sentiment, affect employment in export-linked industries, and disrupt long-standing trade relationships.
Yet amidst the gloom, there are voices urging India to seize this geopolitical disruption as a reform moment. Amitabh Kant, India’s former G20 Sherpa and ex-CEO of Niti Aayog, framed the tariff escalation as a “once in a generation opportunity” for India. “Trump has provided us a chance to take the next big leap on reforms. Crisis must be fully utilised,” he posted on X (formerly Twitter).
At the core of this opportunity lies the chance to re-engineer India’s trade and industrial policy. Several measures are already under evaluation, including a proposal to reinstate interest subsidies on micro, small and medium enterprises (MSME) export credit under the planned Export Promotion Mission. The Commerce Ministry is also in talks with sectors like marine products to design schemes focused on employment-linked incentives that could partially offset the US market setback.
In a broader context, the tariff escalation might also encourage India to deepen its trade ties with other key markets. The European Union, the UK, and the Gulf countries have all emerged as alternative trade destinations with whom India is negotiating free trade agreements. Moreover, the crisis may expedite the need for India to boost self-reliance in critical sectors such as semiconductors, pharmaceuticals, and clean tech — areas where tariff exemptions currently remain.
Some analysts argue that Trump’s use of “secondary tariffs” represents a new form of economic coercion designed to enforce US foreign policy goals indirectly. Unlike traditional sanctions, these duties are not designed to block access to goods or services but to drive up the costs of doing business with geopolitical adversaries. That India finds itself grouped with China and Turkey in this enforcement mechanism is both politically and economically consequential.
Still, India’s relatively restrained response compared to other affected nations may reflect confidence in its medium-term trajectory. With a GDP set to grow over 7 per cent in 2025 and a booming digital economy, India may have more room to absorb external shocks than many of its peers.
Much will depend on whether the tariff remains a temporary tool or hardens into long-term policy. If the Ukraine conflict sees a breakthrough or if India recalibrates its oil trade strategy, the US could ease off. But should the current administration double down, India must adapt quickly, focusing on value-added exports, improving ease of doing business, and reducing dependency on single markets.
issacjohn@khaleejtimes.comis Managing Editor at media and has over 45 years of experience in top-tier newspapers across UAE. A seasoned business writer and economic analyst, he brings unmatched insight into the geopolitics and geoeconomics shaping the Gulf and India.
