Why in News?
On August 27, 2025, the United States under President Donald Trump imposed 50% tariffs on several categories of Indian exports, including apparel, gems & jewellery, footwear, textiles, and marine products. This has triggered concern in trade, diplomatic, and strategic circles.
Key Details of the Tariff Hike
Effective date: August 27, 2025.
Sectors affected: Textiles, gems & jewellery, footwear, chemicals, shrimp, furniture.
Trade value: Could affect nearly $40 billion worth of India’s annual exports to the U.S.
Rationale by U.S.: Linked to India’s continued oil imports from Russia, despite Western sanctions.
Impact on India
Economic Losses
Exports to U.S. may fall 40–45% in FY 2025–26.
Around 2 million jobs in labour-intensive sectors at risk.
Rupee & Markets
The rupee hit a record low, stock markets experienced short-term volatility.
Diplomatic Strain
Despite deepening defense ties (2+2 Dialogue), trade tensions may affect India–U.S. strategic partnership.
Global Trade Realignment
May push India towards export diversification to UK, UAE, Australia.
Government Response
Exploring export market diversification.
Negotiating relief under WTO rules.
Financial cushion and PLI (Production Linked Incentive) support for affected exporters.
Maintaining diplomatic engagement through India–U.S. 2+2 dialogue.
UPSC Relevance
Prelims 2025–26: India–U.S. trade relations, WTO, tariff definitions.
Mains (GS-II / GS-III):
India–U.S. strategic partnership: balancing defense cooperation and trade frictions.
Impact of trade protectionism on emerging economies.
Role of diplomacy in mitigating economic disruptions.
Essay / Ethics: Globalisation vs protectionism; balancing national interest with global obligations.
Practice Question for UPSC Mains
“India–U.S. relations oscillate between strategic cooperation and trade friction. In the context of recent 50% U.S. tariffs on Indian exports, critically analyze the implications for India’s economy and foreign policy.” (250 words)