How U.S. tariffs threaten Indian exports from textiles to jewelry

Earlier this month, President Donald Trump imposed a 25% tariff on Indian goods after trade negotiations between the two countries collapsed. Almost immediately afterward, he announced an additional 25% levy in retaliation for India’s continued oil imports and military ties with Russia, effectively doubling duties to 50% on most Indian exports to the U.S.

The tariffs, set to take effect on August 27, 2025, target India’s largest export market — the United States — which accounted for roughly 20% of the country’s total merchandise exports last year. Analysts project the measures could shave 0.2% to 0.6% off India’s GDP growth and lead to export losses of $5 billion to $8 billion, with labor-intensive sectors hit hardest.

According to The New York Times, the impact could include millions of job losses, large-scale order cancellations, and reduced competitiveness against rivals such as Vietnam and Bangladesh.

Indian industries and sectors most vulnerable to the tariffs include:

Gems and jewelry

The gems and jewelry industry — India’s second-largest export sector to the U.S., contributing $10 billion to $12 billion annually (30–33% of India’s global gems and jewelry exports) — faces severe disruption. The new 50% tariff, up from 0% on cut and polished diamonds and 5% to 7% on gold jewelry, could trigger a 15% drop in exports, amounting to losses of $1.8 billion to $2 billion. Industry leaders warn of a “doomsday” scenario, citing supply chain disruptions, shipment delays, and potential job losses for nearly 5 million workers.

READ: Who lost India? Trump’s tariff approach puts a generation of U.S.-India progress at risk (August 19, 2025)

Major exporters such as Goldiam International, Vaibhav Global, and Rajesh Exports are under pressure, with stock prices already tumbling (Goldiam fell 10%). The sector’s global competitiveness is at risk, particularly against rivals like Israel, with some companies shifting operations to Dubai or Turkey. Still, high-value studded jewelry may remain more resilient, buoyed by India’s craftsmanship, as noted by The New York Times.

Carpets

Carpets, a major component of India’s $10.3 billion textile exports to the U.S., now face tariffs of up to 52.9%. This labor-intensive sector, concentrated in regions such as Bhadohi in Uttar Pradesh, is at risk of widespread order cancellations and business closures. With already thin margins, exporters say absorbing the added costs is impossible, putting their viability in jeopardy. The industry also loses ground to competitors such as Bangladesh and Vietnam, where tariffs are lower at 37% and 46%, respectively—raising the likelihood of mass unemployment.

Clothes (textiles and apparel)

India’s textiles and apparel sector, valued at $10.3 billion in exports to the U.S., now faces steep tariffs ranging from 50% to 63.9% (63.9% on knitted apparel and 60.3% on woven). Major exporters such as Gokaldas Exports, Shahi Exports, Welspun, and Trident are bracing for a projected 20% to 30% decline in shipments, with MSMEs particularly vulnerable to job losses.

U.S. retailers, including Walmart, GAP, and JCPenney, have already paused consignments, demanding discounts of 25% to 30% to offset higher costs. India’s competitiveness is eroding against Vietnam, which recorded 26.2% growth in U.S. imports, and Bangladesh, which saw 44.6% growth. While some trade diversion from China (facing a 34% tariff) may provide limited relief, the overall outlook remains bleak.

Drugs (pharmaceuticals)

India’s pharmaceutical sector, which exports $9 billion to $12.7 billion worth of drugs to the U.S. (accounting for 35% to 50% of its global pharma exports), has been temporarily spared from the 50% tariff. This exemption provides critical relief for major firms such as Sun Pharma, Dr. Reddy’s, Cipla, and Lupin, which rely on the U.S. for 20% to 68% of their revenue. Indian generics alone saved the U.S. healthcare system an estimated $220 billion in 2022.

However, the respite may be short-lived. Trump has threatened future tariffs of 150–250% to boost domestic production — measures that, if enacted, could devastate the sector. For now, pharmaceuticals remain a relative “safe haven,” with potential growth of 2.1%.

Other sectors

Seafood/shrimp: Exports valued at $2 billion to 2.24 billion, with 40% destined for the U.S., now face tariffs of 33% to 58.26%. The sector risks a decline of more than 20%, with significant job losses expected in states such as Kerala.

Chemicals: India’s $2.7 billion in organic chemical exports face tariffs of 54%, threatening global competitiveness.

Auto parts: Exports worth $2.8 billion to $9 billion face tariffs of 25% to 50%, with a projected 12% decline, heavily impacting MSMEs.

Electronics/smartphones: Exports totaling $14.4 billion (38% to the U.S.) risk losses of $1.78 billion under tariffs of 26% to 27%, though some exemptions remain in place.

Leather/Footwear: Exports of $1.18 billion face new challenges, but the sector could see a modest 3.1% gain thanks to higher tariffs imposed on Chinese products.

India’s strategy

To counter the onslaught of tariffs, the Indian government is negotiating a bilateral trade agreement to secure exemptions, while also exploring market diversification toward Europe and the Middle East and considering retaliatory measures. The Ministry of Commerce has described the impact as a “mixed bag,” noting potential gains in textiles and steel from higher tariffs imposed on China.

Prime Minister Modi, in his characteristic dramatic style, has renewed calls for Swadeshi (indigenous, made-in-India production) and his long-standing “Vocal for Local” campaign, first launched in 2014. In recent speeches — most notably on Independence Day 2025 and in Varanasi — he urged citizens to buy Indian-made goods to strengthen the economy, protect farmers, and achieve self-reliance (Atmanirbharta). Framing the effort as a patriotic response to external pressures, he invoked Gandhi’s Swadeshi movement and highlighted local industries ranging from khadi to semiconductors.

Even if the additional tariffs take effect, more than a third of Indian exports to the U.S.—including pharmaceuticals, electronics, and petroleum products—will remain exempt. Still, the measures will undermine the overall competitiveness of Indian exports, particularly in labor-intensive sectors such as textiles, gems, and jewelry. New Delhi is therefore eager to conclude a trade deal, though red lines remain, with Prime Minister Modi vowing that India “will never compromise on the interests of farmers, livestock owners, and fishermen.”

Despite the strains, bilateral ties remain a strategic priority for both countries. Washington continues to see India as a counterbalance to China, while New Delhi looks to the U.S. as a vital partner in technology, defense, and energy cooperation.

In this context, the long-term trajectory of India-U.S. relations is unlikely to shift dramatically. However, recent frictions have tempered expectations in New Delhi of enjoying a special or privileged relationship with Washington. Instead, India is likely to reaffirm its commitment to economic self-reliance and the diversification of export markets, while professing closer ties with countries such as China, Russia, and Iran — even as the U.S. remains its most important partner in practice.