The move, driven by U. S. concerns over India's continued acquisitions of discounted Russian oil, has disrupted key Indian export sectors, prompting urgent government appeals for support and exposing fractures in long-standing economic ties.
The tariff, comprising a previous 25 per cent “reciprocal” levy and an additional 25 per cent penalty tied to energy policy, came into effect on 27 August 2025. It targets sectors such as textiles, gems, jewellery, seafood, carpets and garments—while sectors like pharmaceuticals and semiconductors remain exempt.
Several Indian industries are already feeling the strain. The Gems and Jewellery Export Promotion Council has appealed for rapid relief as export volumes decline and concerns mount over job losses in hubs like Surat. Shrimp exports are projected to drop by 15–18 per cent, threatening a $5 billion segment of trade. Against this backdrop, exporters are diversifying to alternate markets, a strategy partly underway before the tariff implementation.
Analysts estimate that the tariffs affect more than half of India’s $87 billion exports to the U. S., with some forecasts predicting a slump of up to 70 per cent and a potential 1 percentage point drag on India’s GDP.
The economic repercussions are compounded by mounting political and strategic tension. India has condemned the tariffs as unfair and inconsistent, citing the United States’ own continued trade with Russia. U. S. criticism of India’s purchases has drawn sharp rebuke, especially given perceived leniency towards larger buyers like China.
Strategic analysts point to an erosion of diplomatic trust. New Delhi’s multipolar foreign policy, balancing ties across the West, Russia and China, has clashed with Washington’s increasingly transactional approach under the “America First” doctrine. Statements by former U. S. officials and economists like Jeffrey Sachs warn that the tariffs may backfire, isolating the United States while pushing India closer to blocs like BRICS.
Domestic responses in the U. S. have also echoed dissent; members of the House Foreign Affairs Committee noted that the tariff strategy undermines long‑term strategic interests and could hurt American consumers and firms reliant on Indian inputs.