India braces for impact as US$64 billion in exports face risk amid rising tensions with Washington
Workers stitch denim shirts in a garment manufacturing unit on the outskirts of Ahmedabad, India, August 5, 2025. - REUTERS
NEW DELHI: India expects to lose a competitive advantage in about $64 billion worth of goods exported to the U.S. due to President Donald Trump's 25% tariff and an assumed 10% penalty for buying Russian oil, four sources told Reuters citing an internal assessment report by the government.
AI Brief
- Trump imposed the highest US tariffs on Indian goods among Asian peers, with a possible penalty over Russian oil purchases.
- India estimates a 35% tariff could affect US$64 billion in exports but expects limited impact on overall GDP growth.
- Indian officials are balancing ties with Russia while trying to ease tensions with Washington through diplomatic outreach.
A relatively low share of exports in India's $4 trillion economy is seen limiting the direct impact on growth to 40 basis points. The Reserve Bank of India left its GDP growth forecast for the current April-March financial year unchanged at 6.5% and held rates steady on Wednesday despite the uncertainty created by tariff hikes.
The trade impact estimates were prepared by the Indian government after Trump announced the unexpectedly high tariff for Indian goods, along with the unspecified penalty. The Indian government in its assessment report has assumed a 10% penalty for buying Russian oil, taking the tariff to 35%, the four Indian government sources told Reuters.
They declined to be identified because they were not authorised to speak to media.
India's trade ministry did not immediately respond to a request for comment.
Trump said on Wednesday his administration will decide on the penalty for buying Russian oil post the outcome of U.S. efforts to seek a last minute breakthrough in the Ukraine war.
U.S. envoy Steve Witkoff is in Moscow, two days before the expiry of a deadline set by Trump for Russia to agree to peace or face new sanctions.
The impact of the tariff and possible penalty will be on nearly $64 billion worth of India’s exports to U.S that account for about 80% of total exports to the country, and it will lead to 'potential export losses' due to price disadvantages, the four sources said.
The internal assessment report is the government's initial estimate and will change as the quantum of tariff by Trump becomes clear, all four sources said.
India exported goods estimated at around $81 billion in 2024 to the U.S., including garments, pharmaceuticals, gems and jewellery, and petrochemicals, according to government data. The South Asian nation's goods exports to U.S. constituted 2% of GDP in 2024.
Its total goods exports globally were at $443 billion in 2024.
The proposed tariffs on India's high-value exports face "erosion of price competitiveness encountering intensified rivalry from countries subject to lower duties," two sources said citing the internal assessment.
RUSSIA IN FOCUS
India's National Security Adviser Ajit Doval is in Russia on a scheduled visit and is expected to discuss India's purchases of Russian oil in the wake of Trump's pressure on India to stop buying Russian crude, according to a government source.
His visit will be followed by Foreign Minister Subrahmanyam Jaishankar in the weeks to come, amid India's attempts to placate Washington's concerns while balancing historical ties with Moscow.
Doval is expected to discuss India's defence collaboration with Russia, including getting faster access to the pending units of S400 air defence system and President Vladimir Putin's visit to India.
India's foreign ministry did not immediately respond to a request for comment.
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