Since August 27, many Indian goods entering the United States face a 50% tariff, among the highest the US charges any country. Medicines and phones are spared. Shirts, diamonds and shrimp are not.
A cotton T-shirt stitched in Tiruppur and sold in Ohio now pays a 50% tariff at the US border. A similar shirt from Vietnam pays 20%. That gap, more than any speech or summit, is the story of India’s trade year. On August 7 the United States imposed a 25% reciprocal tariff on Indian goods. On August 27 it doubled that, adding a further 25% as a penalty for India’s purchases of Russian oil.
Who gets hit, and who doesn’t
The tariff is not universal. Pharmaceuticals, smartphones and other electronics, and energy products were exempted, which spares some of India’s biggest exports to the US. What remains exposed is the labour-intensive end of the trade: apparel from Tiruppur, cut diamonds and jewellery from Surat, shrimp from Andhra Pradesh, carpets from Bhadohi and leather goods from Kanpur. Trade researchers estimate that about half of the roughly $87 billion India sells to the US each year now faces the full rate.
These industries share two features. They employ large numbers of people per rupee of output, and they compete on thin margins against Vietnam, Bangladesh and Indonesia. A buyer in New York does not need to stop buying Indian shirts; they only need to shift next season’s order to a factory in Ho Chi Minh City that can now undercut Tiruppur by a third.
A tariff is paid at the American border, but the bill lands on the Indian factory floor.
Who actually pays
Technically, an American importer writes the cheque. In practice the cost gets split three ways. Some is passed to US shoppers as higher prices. Some is absorbed by the importer as lower profit. And a good part is pushed back onto the Indian exporter, who is asked to cut prices to keep the order. For a garment unit running on margins of 5% to 8%, absorbing even a few points of a 50% tariff wipes out the year’s profit.
What India can do
The options are slow. Trade negotiations with Washington are continuing. The government is preparing export support and has just cut GST to lift demand at home. Exporters are hunting for buyers in Europe, the Gulf and Africa. A weaker exchange rate helps at the margin, since a cheaper rupee makes Indian goods more competitive. None of it fully replaces the world’s largest consumer market, which is why the negotiation, not the factory, is where this story will be decided.
Sources: US executive orders of July 31 and August 6, 2025; Global Trade Research Initiative estimates.
- The US added a 25% penalty for India’s Russian oil purchases on top of a 25% reciprocal tariff, making 50% from August 27.
- Pharmaceuticals, smartphones and energy were exempted. Textiles, gems and jewellery, and seafood were not.
- Roughly half of India’s $87 billion in annual goods exports to the US is exposed.
- Competitors such as Vietnam and Bangladesh face 20%, which is the real problem for Indian exporters.
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