India is currently grappling with what is being described as one of the most significant diplomatic tensions with the United States in recent years. This situation has arisen after former U.S. President Donald Trump introduced steep tariffs targeting Indian goods, placing India at a disadvantage compared to other Asian countries. The tariffs, which are the highest imposed on any Asian peer, came into effect even before any official penalties were announced—making the economic and political stakes considerably higher.
According to four government sources familiar with an internal assessment, India could lose its competitive edge in exports worth approximately USD 64 billion. This figure represents the value of goods that are now at risk due to Trump's imposition of a 25% tariff on Indian products, along with an assumed 10% penalty for India’s continued purchases of Russian oil. This combined tariff burden of up to 35% could sharply erode the pricing advantage Indian exporters currently enjoy in the U.S. market.
Despite the significant scale of the impact on trade, economists and government officials believe that the broader Indian economy will remain relatively insulated from severe damage. India's economy, now valued at around USD 4 trillion, is expected to absorb the shock without major disruption. The direct impact on GDP growth is projected to be around 40 basis points, or 0.4%. Reflecting this confidence, the Reserve Bank of India (RBI) maintained its GDP growth forecast at 6.5% for the current financial year (April–March), and chose to keep policy rates steady despite the heightened uncertainty triggered by the tariff hikes.
The Indian government prepared its preliminary estimates and internal evaluations shortly after Trump’s announcement of the new tariffs. The assessment report, not publicly released, includes the scenario of an additional 10% penalty being levied as a result of India’s continued imports of discounted Russian oil. These numbers, however, are expected to change as the precise scope of the tariffs and penalties becomes clearer in the coming weeks.
The four government sources who shared this information with Reuters requested anonymity, citing their lack of authorization to speak publicly on the matter. So far, India’s Ministry of Commerce and Industry has not responded to media inquiries about the internal assessment or the government's response strategy.
In a related development, Trump announced that a final decision on the Russian oil-related penalty will be made only after the outcome of the United States' last-ditch diplomatic push to resolve the ongoing Ukraine conflict. Currently, U.S. envoy Steve Witkoff is stationed in Moscow, just two days before the expiration of a deadline set by Trump for Russia to either agree to a peace settlement or face a new round of sweeping sanctions.
The implications of these new trade measures are expected to affect roughly USD 64 billion in Indian exports to the United States. These goods constitute about 80% of India’s total exports to the U.S., meaning the impact will not be limited to fringe products but will hit the core of India’s export-driven industries. Key sectors such as garments, pharmaceuticals, gems and jewellery, and petrochemicals—which are staples of Indian exports—are likely to bear the brunt of the resulting price disadvantage, leading to what sources are calling "potential export losses."
The internal assessment further warns that these high-value exports will face increasing price-based competition from countries not subjected to such high tariffs. This means that India’s relative attractiveness as a trading partner could diminish, especially in markets where cost competitiveness is a decisive factor. Rivals benefiting from lower or no tariffs may capture India’s lost market share in the U.S., particularly in sectors like apparel, electronics, and specialty chemicals.
India’s overall exports to the United States were valued at around USD 81 billion in 2024, according to official government data. With U.S.-bound exports accounting for roughly 2% of India’s GDP, the trade relationship remains crucial. In comparison, India’s total global goods exports stood at USD 443 billion during the same year, making the U.S. India’s single largest export destination by a significant margin.
Amid rising diplomatic friction, Russia remains a key element in the equation. India’s National Security Adviser Ajit Doval is currently on an official visit to Russia, during which he is expected to engage in high-level talks about India’s ongoing oil imports from Russia. The visit is widely seen as an effort to balance India’s long-standing strategic partnership with Moscow while trying to ease Washington’s concerns. According to one government source, this visit also includes discussions on expediting the delivery of pending units of the S-400 air defence system, a major bilateral defence deal between India and Russia.
This visit by Doval is expected to be followed by a diplomatic mission from Foreign Minister Subrahmanyam Jaishankar in the coming weeks. These back-to-back high-level visits underscore India’s attempt to maintain a delicate geopolitical balance—seeking to safeguard its economic and defence interests with Russia, while also trying to manage its vital diplomatic and economic ties with the United States.
At the time of reporting, India’s Ministry of External Affairs had not issued an official statement or response regarding these diplomatic engagements or the status of U.S.-India trade negotiations in light of Trump’s aggressive tariff policy.
