India Now Faces Highest US Tariff at 50%: How It Compares Globally & What’s Next

What Triggered the Tariffs on India?

• Russia-India Oil Trade: Although Western sanctions were imposed on Russia, India has maintained its purchasing of discounted crude oil from Russia. Washington sees India's purchases as undermining the sanctions imposed on Russia.
  
  

• Energy Security Politics: The US has increased efforts to isolate Russia's energy market and is now promoting policy shifts associated with the nations that facilitate Russia's exports.
  
  

• WTO Gridlocks: Multilateral trade institutions have slower responses, thus the US is putting in unilateral tariffs to impose policy shifts.
  
  

How Do India’s Regional Peers Compare?

India’s new tariff rate far exceeds that of other Asian economies and even US allies.

Takeaway: India now faces far greater US trade friction than both its neighbours and strategic partners like Japan or the EU.

Which Indian Sectors Are Most Exposed?

Here are the sectors likely to take the biggest hit due to the 50% tariff barrier:

Top Indian Export Sectors at Risk

Note: Software services are largely unaffected, as tariffs mainly apply to physical goods.

India’s Response: What the MEA and Industry Are Saying

India's Ministry of External Affairs termed the move as 'unfair, unjustified, and unreasonable', ultimately noting that India's energy decisions are based on its sovereign interests. 

Trade bodies like FIEO (Federation of Indian Export Organisations) have suggested that the rise in tariff may lead to cancellations of orders especially among MSMEs which operated on thin profit margins.

What’s Next for India–US Trade Relations?

With tensions now visible, several likely scenarios could unfold:

Possible Outcomes

1. Negotiated Tariff Rollback
   India may enter trade talks with the US to negotiate a rollback, possibly by offering diversification in oil sourcing.
   
   

2. Diversification of Export Markets
   Indian exporters may look to ramp up trade with the EU, ASEAN, and Gulf countries to offset US losses.
   
   

3. Closer BRICS Engagement
   As Western trade ties cool, India may push for stronger economic ties within BRICS+ and SCO networks.
   
   

4. Legal Action at WTO
   India may explore challenging the tariffs under WTO rules, though results are slow and uncertain.

Expert Opinions

• Dr. Rajeev Batra, Trade Economist, ICRIER:
  “This move is as political as it is economic. India will need to be careful not to get caught in a new Cold War-style economic rivalry.”
  
  

• Tanvi Mehta, Director, Global Supply Chain Forum:
  “Exporters must quickly identify tariff-free trade corridors—this is not the time to wait and watch.”
  
  

Key Takeaways

• India currently holds the highest US tariff position in the world (at 50%), along with Brazil.

• The decision is related to geopolitical tensions over imports of Russian energy.

• Exporters are likely to be very hard hit in significant trade sectors, such as apparel, auto, jewelry, etc.

• India may either have to diversify its export markets, strengthen BRICS trade, or consider WTO arbitration.

• Future trade talks may take place between Delhi and Washington, which may provide an opportunity for course correction.

Frequently Asked Questions

1. Why did the US impose a 50% tariff on India in 2025?

In August 2025, the US instituted 50% tariffs on all imports from India in reaction to India's purchase of discounted oil from Russia. The White House indicated that this would undermine the Western sanctions against Russia, and President Trump issued an executive order to increase the tariffs to 50%, by adding 25% to the tariff previously ordered.

2. Which countries are facing the highest US tariffs right now?

As of August 2025, India and Brazil face the highest US tariffs at 50% each. Other countries under high tariff regimes include Syria (41%), Myanmar (40%), Switzerland (39%), and China (30%).

3. How will India’s 50% tariff affect exports?

The new tariff is likely to have a major impact on Indian exports to the US, particularly in sectors such as: textiles, auto components, gems and jewellery, and pharmaceuticals. Many MSMEs could potentially lose their access to the US market or cancellations to orders, potentially due to increases in costs.

4. Will this tariff affect India’s software or IT services exports?

No. Tariffs primarily apply to physical goods, not services. Software and IT services exports to the US remain unaffected.

5. What can India do in response to the US tariffs?

India has a few options:

• Negotiate with the US to ease tariffs
  
  

• Shift focus to alternate markets like the EU, Gulf, or BRICS+
  
  

• Challenge the tariff hike at the WTO
  
  

• Rebalance its energy sourcing to reduce reliance on Russian oil
  
  

Is the India-US trade relationship at risk?

Even with the increased tensions, both countries have strong economic and strategic ties - the tariff is certainly a setback, but there may be future dialogue or diplomatic initiatives that can reduce the trade conflict. India will likely take both diplomatic and strategic actions to protect its economic interests.

Final Thought

This is a test of India's global trade strategy and its ability to manage economic interests alongside geopolitical realities. What emerges from this could change not just India–US trade but also India's position in a rapidly changing global economy.