The 2025 US Tariff Shock

How the United States imposed steep tariffs on Indian goods in 2025, which sectors were hit hardest, and how India responded.

The United States is India’s largest export market. In 2025, it became the source of India’s biggest trade shock in decades.

What happened

In April 2025, the US announced “reciprocal” tariffs on imports from most countries, arguing that trading partners charged higher tariffs on US goods.
In August 2025, the US imposed a 25 percent tariff on many Indian goods, followed by an additional 25 percent penalty linked to India’s purchases of Russian oil. This took the tariff on many Indian goods to 50 percent, among the highest faced by any country.
Some goods, such as pharmaceuticals, smartphones and certain electronics, were exempted or treated differently.

Who was hit

The hardest-hit sectors were labour-intensive exports, where margins are thin and competitors face lower tariffs:

Textiles and garments, including centres like Tiruppur.
Gems and jewellery, especially diamond polishing in Surat.
Shrimp and seafood, from Andhra Pradesh and elsewhere.
Leather and footwear, carpets, handicrafts and some engineering goods.

Exporters reported cancelled orders, and buyers shifted to suppliers in countries such as Vietnam and Bangladesh, which faced lower US tariffs.

India’s response

Trade negotiations with the US on a bilateral agreement.
Market diversification: exporters were encouraged to seek buyers in Europe, the Middle East and elsewhere, helped by new FTAs.
Support for exporters: the government announced relief measures, and in September 2025 it cut GST rates on many domestic goods, partly to boost home demand.

Economic lessons

Depending heavily on one market is risky.
Tariffs can be used for geopolitical goals, not just trade.
Labour-intensive sectors with small margins are the most vulnerable to tariff shocks.

The shrimp farmer

A shrimp farmer in Andhra Pradesh sold most of his harvest to exporters shipping to the US. When 50 percent tariffs hit, exporters cut the price they paid him. He looked for buyers selling to Europe and the domestic market, but prices were lower.

Thinking tariffs are paid by the exporting country's government

Tariffs are paid by importers in the country imposing them. But they make exporters' goods less competitive, so exporters often lose orders or cut prices.

Key takeaways

In August 2025, US tariffs on many Indian goods reached 50 percent.
Part of the tariff was a penalty linked to India's purchases of Russian oil.
Textiles, gems, shrimp and leather were hit hardest.
India sought a trade deal, diversified markets and supported exporters.