India’s export sectors are reeling after the U.S. doubled import tariffs to 50%, combining an existing 25% reciprocal duty with a new 25% levy tied to India’s Russian oil trade. According to a Moody’s Analytics report, this sharp escalation will significantly slash demand for Indian goods in the U.S., potentially undermining growth in critical manufacturing sectors.
Export Shock and Sectoral Impact
The textile and apparel industry has been especially hard-hit. The Cotton Association of India warned of a 50% drop in cotton yarn orders from the U.S., leaving players struggling to stay competitive. In response, the government has temporarily lifted the 11% import duty on cotton from August 19 to September 30. This move provides short-term relief by reducing input costs and helping producers maintain export momentum.
Economic Forecasts and Market Response
Relying on revised estimates from Moody’s, India’s GDP growth could slow by 0.3 percentage points—from a projected 6.3% for fiscal year 2025–26. The impact may further damage high-value manufacturing, electronics, and foreign investment prospects, according to analysts. Meanwhile, brokerage and stocks in the textile sector buoyed investor optimism following the cotton duty exemption, with shares jumping up to 9%.
Strategic Diplomatic Fallout
This tariff escalation has far-reaching geopolitical implications. The sudden disruption in trade relations threatens to derail India’s “Make in India” plan and unsettle strategic partnerships within frameworks like the Quad. Analysts warn that prolonged tensions with the U.S. may push India closer to Russia and China, upending its carefully balanced foreign policy trajectory.
Government Action and Industry Survival
Exports to the U.S. account for roughly one-third of India’s garment and textile shipments. With the elevated tariffs, exporters face shrinking margins and delayed orders. The government is weighing targeted support packages for exporters and pointing industry bodies to explore new markets to diversify demand.
Resilient Sectors and Possible Positives
Despite the turbulence, India retains strengths in sectors like pharmaceuticals, which remain exempt from these tariffs, and gems and jewelry, which enjoy sustained U.S. demand. The temporary cotton duty reprieve and potential diplomatic realignments may also provide narrow windows for strategic recovery, even as challenges persist.
