New Delhi: Indian exporters are preparing for a substantial earnings blow after the United States announced a steep 50 per cent tariff on imports from India, according to a report by Crisil Ratings. The move combines a 25 per cent reciprocal tariff already in place with an additional 25 per cent penalty that will take effect on August 27, 2025.
The penalty is linked to India’s continued crude oil imports from Russia and is set to make Indian products significantly less competitive in the US market compared to many Asian peers, with China being a notable exception. The tariff escalation is poised to affect high-value sectors such as diamonds, shrimp, home textiles, carpets, and ready-made garments.
Diamonds are among the most vulnerable, with the US accounting for about 25 per cent of revenue for India’s diamond polishing industry. This sector is already grappling with subdued demand for natural diamonds and rising interest in lab-grown alternatives. The added tariff burden is likely to intensify the revenue squeeze and erode profit margins further.
The shrimp sector faces an even sharper impact, as 48 per cent of Indian shrimp exports go to the US. The increased duties will make Indian shrimp the most heavily taxed in the American market, potentially causing a steep drop in volumes.
Home textiles and carpets, which rely on exports for 60-75 per cent of their sales, also stand to suffer significant revenue and profit declines. The US is the top buyer, sourcing 60 per cent of India’s home textile exports and 50 per cent of its carpet shipments.
Ready-made garments are less dependent on the US, with only 10-15 per cent of sector revenue coming from that market. However, the tariffs will weaken competitiveness against products from countries like Vietnam and China. Agrochemicals and capital goods may also see growth slow, given stiff global competition and a smaller but notable US exposure.
The US is India’s largest export destination, accounting for 20 per cent of merchandise exports last fiscal year and contributing 2 per cent to the nation’s GDP. While strong corporate balance sheets, potential trade pacts, and government support could soften the blow, Crisil warns that the tariff shock will be significant, especially for sectors deeply tied to the US market.
