On 29 August 2025, the Indian rupee sharply fell to a new low of around 88.17 against the US dollar after the United States doubled tariffs on Indian imports to a hefty 50%.
This move, primarily aimed at products linked with India’s Russian oil purchases, threatens to undercut Indian exporters competing in the American market. With exports at risk, particularly from labour-intensive sectors like textiles, jewellery, and seafood, fears of job losses and economic slowdown have grown.
While the Indian government has ruled out retaliation, it is actively engaging Washington in talks to ease tensions.
Industry experts warn that unless resolved soon, these tariffs combined with a weakening rupee and foreign investor sell-offs may significantly impact India’s economic trajectory and bilateral relations.
Market Turbulence and Sectoral Concerns
The tariff escalation has sent ripples through financial markets, with the rupee weakening 0.65% on the day of the announcement. The export-driven sectors, notably textiles, leather goods, seafood, and diamond polishing, now face an uphill battle as competing countries such as Vietnam, Bangladesh, and China maintain much lower tariff rates with the US.
The doubling of tariffs from 25% to 50% raises the cost for Indian goods, jeopardising approximately 70% of India’s exports to the US, according to trade analysts.
This sharp tariff hike is expected to disproportionately affect Micro, Small, and Medium Enterprises (MSMEs) and women workers in these industries, who comprise a vulnerable segment of the workforce.
The Reserve Bank of India (RBI) has expressed concerns over demand erosion but noted strong rural consumption and a diverse export base may offer some cushion. Concurrently, the Indian stock market saw sustained foreign investor outflows, marking a notable economic uncertainty phase.
Backdrop of the Trade and Diplomatic Rift
The India-US trade crisis is rooted in divergent economic and geopolitical interests. The Trump administration’s “America First” policy blamed India’s continued imports of Russian oil for the new tariff imposition, accusing New Delhi of sustaining Moscow’s war efforts in Ukraine.
While the US imposed tariffs totaling 50% on goods ranging from apparel, footwear, sports equipment, and chemicals, India condemned the move as unjustified and discriminatory, asserting its strategic autonomy in energy sourcing amid global supply disruptions.
Previous attempts to negotiate tariff reductions to around 15%, akin to US deals with Japan and the EU, stalled after several rounds marked by misunderstandings.
This tariff crisis joins earlier tensions over defense procurements and geopolitical alignments, straining ties between two democracies that have shared strategic and security cooperation over decades.
Indian officials emphasize resilience and readiness to mitigate economic impact while affirming their commitment to the bilateral relationship’s broader goals.
The Logical Indian’s Perspective
The mounting economic strain and diplomatic friction highlight the complexity of globalisation amid competing national interests. Imposing steep tariffs risks not only economic damage but also undermines trust between longtime partners.
The rupee’s fall and export difficulties affect livelihoods across India’s social spectrum, from farmers to factory workers, necessitating empathy and solidarity in responses. Constructive, respectful dialogue that prioritises partnership over punitive measures offers the best path forward. Can India and the US find a way to balance their legitimate concerns without sacrificing cooperation and shared progress?
