Indian exporters are bracing for a sharp decline in US orders after trade talks collapsed and Washington confirmed steep new tariffs on the South Asian nation’s goods will take effect from Wednesday, escalating tension between the strategic partners.
An additional 25% duty announced by President Donald Trump, confirmed in a notice by the US Department of Homeland Security, takes total tariffs to as much as 50%, among Washington’s highest, in retaliation for New Delhi’s increased buying of Russian oil.
“The government has no hope for any immediate relief or delay in US tariffs,” said an Indian commerce ministry official, seeking anonymity for lack of authorisation to speak to media.
Exporters hit by tariffs would receive financial assistance and be encouraged to diversify to markets such as China, Latin America and the Middle East, the official added.
The commerce ministry did not immediately respond to an email seeking comment on the latest notice.
The new duties will apply from 12:01 a.m. EDT on Wednesday (9:31 a.m. IST), it showed. Exceptions are shipments in transit, humanitarian aid, and items under reciprocal trade programmes.
The Indian rupee fell to a three-week closing low of 87.68 against the dollar.
The benchmark equity indexes .NSEI and .BSESN closed down 1% each, their biggest daily declines in three months.
Wednesday’s tariff move follows five rounds of failed talks. Indian officials had signalled optimism that tariffs could be capped at 15%.
Officials on both sides blamed political misjudgment and missed signals for the breakdown in talks between the world’s biggest and fifth-largest economies, whose two-way trade is worth more than $190 billion.
White House trade adviser Peter Navarro and US Treasury Secretary Scott Bessent have accused India of indirectly funding Russia’s war against Ukraine by boosting Russian oil purchases.
This month, Bessent said India was profiteering from its sharply increased imports, making up 42% of total oil purchases, versus less than 1% before the war, a shift Washington has called unacceptable.
The standoff has raised questions about the broader relationship between India and the US, important security partners who share concerns about China.
However, on Tuesday the US State Department and India’s Ministry of External Affairs issued identical statements saying senior officials of the ministries and defence departments met virtually on Monday and expressed “eagerness to continue enhancing the breadth and depth of the bilateral relationship.”
The statements said both sides looked forward to increasing defence cooperation and also discussed trade and investment, energy security, critical minerals exploration, and counter-narcotics and counter-terrorism cooperation.
Both sides also reaffirmed their commitment to the Quad, a partnership that brings together the US and India with Australia and Japan. It is supposed to meet at leader level later this year.
India has issued no directive yet on oil purchases from Russia. Companies will continue to buy oil on the basis of economics, three refining sources said.
EXPORTERS SEEK AID
Exporter groups estimate hikes could affect nearly 55% of India’s merchandise exports worth $87 billion to the US, while benefiting competitors such as Bangladesh, China and Vietnam.
“The US customers have already stopped new orders,” said Pankaj Chadha, president of the Engineering Exports Promotion Council. “With these additional tariffs, the exports could come down by 20% to 30% from September onward.”
The government has promised financial aid such as greater subsidies on bank loans and support for diversification in the event of financial losses, Chadha added.