The Big Bang: Trump Resolution

On August 27, 2025, the penal tariff slapped by US president Donald Trump on most Indian goods, doubling an earlier 25 per cent, came into effect. Exemptions reportedly include pharmaceuticals and (some) electronics/smartphones; affected categories include textiles and apparel, gems and jewellery/diamonds, seafood (shrimp), furniture, machinery, chemicals, leather/footwear and metals.

India exported $87 billion in goods to the US in 2024/25, making the US India’s largest single goods market. Early projections suggest a sharp contraction of India’s shipments to the US to approximately $50 billion in 2025 ($36-37 billion fall). Using standard export-employment linkages (25,000 jobs per $1billion of merchandise exports), the order-of-magnitude jobs at risk along Indian supply chains is 0.9-1.0 million, concentrated in labour-intensive clusters, such as Surat diamonds, Tiruppur/Noida apparel, Bhubaneswar/Vizag shrimp, Jodhpur/Jaipur furniture and Agra leather.

Sectoral Impacts of US Tariffs

Indian textiles and apparel—worth over $17 billion annually in exports to the US—are among the hardest hit by Trump’s tariff escalation. Effective duties now reach 50-60 per cent (63.9 per cent on knitted garments, 60.3 per cent on woven apparel, 59 per cent on home textiles), wiping out cost competitiveness. Unlike pharma, electronics and petroleum—explicitly exempt—labour-intensive sectors such as garments, carpets and made-ups face the full brunt of these punitive measures. For India’s largest surplus-generating export industry, the tariff shock threatens margins, jobs, and market share in its most critical destination.

Duties on gems and diamonds have surged to 53 per cent, with diamonds (previously near-zero tariffs) now facing 50 per cent. Exports to the US have collapsed from $9.9 billion (2021-22) to $4.8 billion (2024-25). Surat and Mumbai—employing 1.2 million workers—are bracing for further order cancellations and plant shutdowns. Without urgent policy cushioning, India’s global leadership in diamond-cutting risks erosion.

Shrimp exports face the steepest blow: 58.5 per cent effective tariffs, with vannamei shrimp moving from zero per cent to 60 per cent. The US, India’s biggest market, absorbed $2.34 billion of shrimp in 2023-24 (92 per cent of seafood exports). Now, processors face collapsing margins and farmers in Odisha, Andhra Pradesh and Gujarat report plunging farm-gate prices. Employment stress is mounting across the supply chain, threatening one of India’s most successful agri-export stories.

As for furniture and wood products, shipments worth $1.4 billion in 2024 now face 53 per cent duties. Bulky freight and thin margins mean buyers can easily switch to Vietnam and China. Jodhpur and Uttar Pradesh clusters, already fragile, face immediate order loss, layoffs and possible factory closures—jeopardising thousands of small and medium enterprises.

Tariffs imposed on machinery are 51 per cent, 54 per cent on chemicals and 52 per cent on metals. And the exposure: tens of billions, with machinery $6-7 billion, electronics $9.9 billion (smartphones exempt), and chemicals substantial. These sectors, dominated by price-sensitive Original Equipment Manufacturer (OEM) buyers, face rapid substitution by East-Asian competitors. The European Union and Gulf markets may absorb some re-routing, but the US shortfall is unlikely to be bridged quickly. Once supply chains shift, regaining the US share will be arduous.

Pharmaceuticals and selected electronics are largely exempt. Roughly 30 per cent of India’s US-bound exports ($27.6 billion)—spanning pharma, raw drug materials, refined fuels and some electronics—continue to be duty-free, cushioning India’s balance of payments. However, dependence on exempted sectors now grows sharper as labour-intensive exports shrink.

Geopolitical Drivers

A key driver behind the US tariff spike on Indian goods lies in the Russia-India nexus. The Trump administration explicitly linked the measure to New Delhi’s continued purchases of discounted Russian crude oil—perceived as weakening US-led sanctions amid the Ukraine conflict—and its steadfast defence procurements from Moscow. Framed as punitive, the tariff was meant to heighten diplomatic pressure on India for refusing to align with Western penalty regimes.

Trade imbalances formed a second rationale. By 2024, the US goods trade deficit with India had widened to more than $45 billion. Staying consistent with his ‘America First’ platform, Trump deployed tariffs as leverage to both shrink this deficit and pry open restricted Indian sectors such as agriculture and dairy for American exports.

A third driver was India’s growing role within BRICS (Brazil, Russia, India, China and South Africa) and its participation in efforts to establish alternative payment systems that could reduce reliance on the US dollar. Washington viewed this as a direct challenge to dollar hegemony and to US financial primacy. The tariff thus doubled as a strategic warning against attempts to institutionalise a sovereign financial order within the Global South.

Finally, the imposition reflected tensions between Washing­ton’s expectations of transactional loyalty and India’s insistence on strategic autonomy. The US sought clear ideological alignment in its alliances, whereas India persisted with an independent foreign policy—maintaining separate engagements with Russia, China and multilateral forums. This divergence, sharpened by the Russia question, set India on a collision course with Trump’s demand for binary bloc commitments.

Trump-Modi Ties Strained?

The US tariff escalation has laid bare the futility of Prime Minister Narendra Modi’s much-advertised personal rapport with Trump. Modi went out of his way to court the US President—endorsing him on American soil with the ‘MIGA’ (Make India Great Again) flourish and projecting their chemistry as a symbol of Indo-US convergence. Yet, far from rewarding this indulgence, Trump repeatedly singled out India for punitive action. In 2018, Washington imposed 25 per cent tariffs on Indian steel and 10 per cent on aluminium, directly hitting over $1.5 billion of exports. In 2019, the US terminated India’s benefits under the Generalised System of Preferences (GSP), stripping duty-free access to goods worth nearly $6 billion annually. These steps represented the sharpest downgrading of trade ties in decades.

Rather than cementing goodwill, Modi’s partisan tilt towards the US—in line with the Hindu Right’s historic affinity for America and its allies like Israel—squandered India’s standing in the wider anti-imperialist world. Worse still, the supposed friendship brought only humiliation: Trump openly mocked India’s ‘tariff king’ status and berated its oil purchases from Russia, termed them ‘dead economies’, treating India with the same coercive disdain he reserved for rivals.

The contrast between the warm optics of ‘Howdy, Modi’ or ‘Namaste Trump’ and the cold reality of US trade sanctions could not be starker. What remains is a sobering lesson in strategic overreach: ideological affinity and personal theatrics cannot substitute for hard-headed diplomacy, and Modi’s gamble on Trump left India more vulnerable, not less.

A Theatre of Optics

Modi’s approach to diplomacy has been marked less by institutional deliberation than by a self-styled charisma and personal bravado. Instead of empowering India’s Ministry of External Affairs (MEA) and career diplomats to engage in nuanced, long-term negotiations, he often preferred to centralise foreign policy in the Prime Minister’s Office, travelling extensively abroad and conducting ‘leader-to-leader’ engagements as though India’s global standing could be secured through spectacle and his personal rapport with world leaders.

Foreign policy became a theatre of optics while India’s structural interests—whether in trade, immigration, or geopolitical alignments—were left inadequately defended. This not only undermined India’s negotiating credibility but also revealed the fragility of a model where a nation’s global strategy hinges precariously on the personal charisma of its leader rather than the institutional strength of its statecraft. Modi’s foreign policy has been marked less by a long-term professional strategy and more by his penchant for personal spectacle. He projected himself as the embodiment of India on the global stage, frequently bypassing the institutional wisdom of the MEA and reducing diplomacy to carefully choreographed moments of bonhomie with world leaders. The emphasis on optics rather than substance created an illusion of influence, which soon unravelled when tested by hard realities of international relations.

The most glaring example is Modi’s engagement with Chinese President Xi Jinping. The much-touted ‘informal summit’ at Ahmedabad in 2014, staged with lavish symbolism along the Sabarmati riverfront, was billed as a turning point in Sino-Indian relations. Yet, within months, Chinese incursions in Ladakh escalated, culminating in the 2020 Galwan Valley clash where 20 Indian soldiers lost their lives. Modi’s personal overtures to Xi neither moderated Beijing’s strategic ambitions nor prevented border confrontations. Rather, the indulgence in spectacle weakened India’s bargaining position, leaving New Delhi scrambling to rebuild deterrence after a humiliating loss.

Similarly, Modi’s relationship with the late Shinzo Abe of Japan was celebrated as a model of personal diplomacy, with both leaders cultivating an imagery of shared civilisational bonds and economic partnership. The PM even hosted Abe in his home state of Gujarat to emphasise closeness. Yet, this relationship failed to translate into durable strategic leverage. Japan hesitated to go beyond symbolic gestures in supporting India during its standoff with China, while the much-advertised Japanese investment promises were either delayed or fell short of expectations. Modi’s theatrics did little to secure firm Japanese commitments to India’s infrastructural and defence needs, underscoring the gap between personal rapport and institutionalised policy outcomes.

The same trajectory unfolded with Trump. These spectacles projected Modi as a leader with unmatched access to the White House. Yet, behind the optics, Washington pursued its own interests: tightening H-1B visa rules that hurt Indian tech workers, withdrawing India’s preferential trade status under the GSP worth nearly $6 billion, and imposing punitive tariffs on steel and aluminium exports. No amount of personal bonhomie could override this hard strategic logic. In the process, Modi’s style of negotiating directly with counterparts while sidelining institutional processes undermined India’s bargaining power and left policy reactive rather than anticipatory. His embrace of Trump yielded no concessions; instead, India absorbed some of the harshest economic blows from the very leader Modi had so extravagantly feted. In the last skirmish with Pakistan, this diplomatic hollowness was squarely exposed.

Poor Indians to Pay the Cost

Trump’s blunt dismissal of India’s trade ties with Russia underscores the harsher political climate accompanying Washington’s tariff offensive. Goldman Sachs’ Santanu Sengupta has warned that sustained 50 per cent levies could drag India’s Gross Domestic Product growth below six per cent, compared to the projected 6.5 per cent, as rivals such as Turkey and Thailand capitalise on the tariff differential to lure American buyers with cheaper goods. According to the Federation of Indian Export Organisations (FIEO), manufacturers in Tiruppur, Delhi and Surat have halted production amid collapsing cost competitiveness. FIEO President S.C. Ralhan noted that Indian goods are rapidly losing ground to competitors from China, Vietnam, Cambodia, the Philippines and other Southeast-Asian economies. The financial markets have mirrored these anxieties: from August 26 to 29, the BSE benchmark slid 2.23 per cent and the Nifty tumbled 2.16 per cent, reflecting the vulnerability of India’s export-driven sectors. Given that the US absorbs nearly a third of shipments in areas such as textiles and gems, the potential economic fallout is significant. The PM’s only response so far has been a call for Swadeshi—the same tired trick of turning crisis into spectacle.

(Views expressed are personal)

Anand Teltumbde is an Indian scholar, writer and human rights activist