Will the 50% tariffs rebuild the world order and build stronger allies?

On August 27, 2025, the United States fully implemented an additional 25% tariff on a wide range of Indian goods. This steep tariff, which is in addition to the prior 25% duties, brings the total tariff burden to a cumulative 50% for many key sectors.

The move marks one of the harshest trade penalties directed at India in recent memory and is a direct response to India’s continued procurement of Russian oil. The economic shock is profound, threatening Indian exports worth tens of billions of dollars and imperilling millions of jobs across critical sectors.

Faced with this challenge, India’s options involve a blend of immediate mitigation and strategic recalibration. Domestically, policies aim to shore up the affected manufacturing sectors through financial aid, subsidies, easing of regulatory frameworks, and trade promotion initiatives targeting varied markets.

Importantly, India will lean heavily on its vast internal market and anticipated surge in domestic consumption, particularly during the festive season, to offset export losses.

Internationally, India is accelerating diversification of its trade partners, deepening ties beyond the US to include the United Kingdom, United Arab Emirates, Gulf nations, European Union, ASEAN countries as well as cautiously engaging with China and strengthening strategic cooperation with Russia.

This multi-vector approach enables India to reduce dependency on a single export market, pursue free trade agreements, and bolster its resilience in an uncertain global trade environment.

Areas of Business Impacted

The US-imposed tariffs disproportionately affect labour-intensive and MSME-driven export sectors that have been central to India’s external trade and employment.

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Textiles and Apparel: With exports to the US representing roughly $10.8 billion, this sector experiences the steepest tariff increase, from approximately 13.9% to over 63.9%. Key clusters in Tiruppur, Noida-Gurugram, Bengaluru, Ludhiana, and Jaipur face major disruptions, threatening the livelihoods of millions in manufacturing and supply chains.

Gems and Jewellery: The US accounts for 40% of India’s $10 billion gems and jewellery exports. Tariffs rising to over 52% imperil hubs like Surat, Mumbai, and Jaipur, risking job losses among skilled artisans and workers.

Seafood and Marine Products: US tariffs inflate duties on Indian shrimp exports (~$2.4 billion), with duties now reaching 60%, risking market share loss to competitors like Ecuador with far lower tariffs.

Leather Goods and Footwear: This $1.2 billion sector, critical to regions like Agra and Kanpur, faces tariff-driven competitive erosion from Vietnam, Indonesia, and Mexico.

Agriculture and Processed Foods: Commodities like basmati rice, spices, and tea (~$6 billion exports) now encounter 50% tariffs, benefitting Pakistan, Thailand, and Vietnam.

Handicrafts and Carpets: High tariffs threaten export-oriented artisanal clusters, surrendering space to Turkey, Pakistan, and Nepal.

Automotive Components: Valued at around $6.6 billion, components face elevated tariffs, with some segments now subject to a 50% rate, risking supplier networks.

Conversely, certain sectors have been temporarily exempt to safeguard strategic interests, including pharmaceuticals (accounting for $8.7 billion in exports), electronics, and petroleum products.

The Consumption Drive Due to Festive Seasons in India

The upcoming Indian festive season (September to December) presents a vital opportunity to stimulate domestic consumption and counterbalance export slowdowns.

Historically accounting for 30 to 40% of annual retail sales across sectors such as apparel, electronics, home appliances, jewelry, and vehicles. This period is marked by heightened consumer spending driven by cultural customs and discount offers.

Surveys indicate over 90% of Indian consumers plan to maintain or increase festive spending in 2025, reflecting sustained optimism despite external economic shocks. The proliferation of e-commerce platforms, rapid growth of quick commerce, and expansion of value-driven retail formats further amplify this consumption surge. Coupled with ongoing tax reforms aimed at increasing disposable incomes, the festive season offers a crucial buffer to absorb impacts on MSMEs and labor-intensive sectors shaken by tariffs.

Is This a Miscalculated Step by the US to Punish India?

Many trade and geopolitical analysts view the 50% tariff imposition as a strategic miscalculation by the US. The punitive tariffs risk severely damaging a once robust US-India partnership just as India is seen as a vital counterbalance to China’s regional ambitions.

By escalating economic pressure, the US undermines trust at a delicate juncture, potentially incentivizing India to accelerate diversification away from US ties.

Further, economic repercussions could backfire on American interests since higher Indian export tariffs raise costs for US consumers and importers, especially within textiles and jewelry sectors.

Competitors such as China and Vietnam stand to gain Indian market share, potentially undermining US objectives of supply chain diversification.

From a geopolitical standpoint, penalizing India over Russian oil procurement may alienate a key player navigating complex energy needs, while allowing China easier maneuvering space. The move risks fostering an adversarial regional dynamic rather than the cooperative framework the US seeks to promote.

If India Is Able to Tide Over the Tariff Impact, Will It Dent US Standing Geopolitically?

If India manages to absorb the tariff shock through strong domestic demand and diversified global partnerships, it would represent a significant dent to US geopolitical leadership. It would affirm that economic coercion is an ineffective tool against an emerging power with a vast market and strategic autonomy.
India’s resilience would encourage other nations to pursue self-reliance, multipolar trade frameworks, and diversification of diplomatic alignments. This would undermine US leverage in Asia and beyond, complicating efforts to isolate rivals and shape regional security and economic architectures.

India’s sustained growth and strategic maneuvering would bolster its standing as a dominant regional power, capable of asserting independent policy choices that resist US pressure. In this scenario, US influence could erode, forcing recalibration of its approach towards India and the Indo-Pacific.

The Countries That India Will Get Closer To

In response to US tariffs, India is pivoting to strengthen and deepen relationships with several countries and blocs to diversify its trade and strategic dependencies:

● China: Pragmatic engagement is resuming, including relaxed trade barriers and connectivity projects, seeking mutual economic benefits despite ongoing border sensitivities.
● Russia: Energy and defense ties continue to grow, with strategic cooperation deepened amid Western sanctions on Moscow.
● United Kingdom: A recently finalized FTA marks the UK as a premier alternative export partner with tariff-free access to Indian goods.
● United Arab Emirates & Gulf Cooperation Council: Expanding trade, energy, and investment links accelerate with these resource-rich nations.
● European Union & Other Europe: Efforts to finalize or upgrade trade agreements with EU nations aim to open new markets.
● ASEAN Nations: Regional trade cooperation is actively pursued to enhance integration.
● Eurasian Economic Union: Negotiations for a free trade agreement with members like Kazakhstan and Belarus offer additional market openings.
● Latin American Countries: Enhanced cooperation is being sought for trade and resource exploration.

This multi-directional outreach embodies India’s broad strategy to reduce reliance on a single partner and build resilience in a fractured global environment.

The Erosion of the Quad and US Alliances

The tariffs are a blow to the Quad alliance, which includes the US, India, Australia, and Japan, and was explicitly created to counter China's influence. By treating India with the same level of tariff aggression as China, the US is undermining the very trust it needs to maintain this strategic alliance. This move alienates a crucial partner and may lead India to rethink its level of cooperation with the US on security and strategic matters.

Supply Chain Realignment

The tariffs are already triggering a shift in global supply chains. Indian exporters, no longer competitive in the US market, are looking for new buyers, while US importers are scrambling to find alternative suppliers.

This could lead to a restructuring of trade flows, with countries like Vietnam, Mexico, and even China gaining market share at India's expense. This is a direct contradiction of the US's goal of decoupling from China and diversifying its supply chains.

US Appeals Court Ruling on Tariffs: Implications for India

A US federal appeals court has dealt a blow to former President Donald Trump’s tariff policy, ruling that he exceeded his authority by using the International Emergency Economic Powers Act (IEEPA) to impose sweeping trade duties. The court said the 1977 law, meant for emergency sanctions and asset freezes, does not grant presidents the power to levy tariffs.

The ruling, however, is on hold until October 14, 2025, giving the administration time to appeal to the Supreme Court. Until then, the 50% tariffs on Indian goods remain in effect, leaving exporters with no immediate relief.

For India, the judgment provides hope but not certainty. New Delhi has long argued that the tariffs were unfair and legally unsound. A Supreme Court affirmation could strengthen India’s hand in future trade talks. Yet, some experts note that not all duties may be covered by the ruling. Earlier tariffs, such as the initial 25% duties, could still stand under separate provisions, meaning Indian exporters may continue to face significant barriers even if the appeal fails.

Beyond India, the case carries broader implications:

● Presidential Limits: If upheld, the decision would restrict unilateral tariff powers and shift authority back to Congress, creating more predictability in global trade.
● Business Uncertainty: Companies across supply chains remain unsure whether tariffs will end or continue, complicating long-term planning.
● Political Tensions: Trump has called the ruling a “total disaster,” signaling that tariffs remain central to his economic strategy.

In short, the court ruling has injected new legal uncertainty into US-India trade ties. Its ultimate outcome could reshape not only the tariff dispute but also the way Washington uses economic pressure as a foreign policy tool.

How and Where This Will Place India

Successfully weathering this tariff storm would position India as an economically resilient and strategically autonomous powerhouse. Economically, India would emerge with enhanced domestic consumption-led growth, diversified export linkages, and competitive attractiveness that mitigate external shocks better than many peers.

Geopolitically, India’s ability to resist punitive economic measures while forging independent partnerships would elevate it as a key Asian power balancing China’s rise. India would gain enhanced leverage in multilateral forums and regional security dialogues while defining its own path distinct from US or Chinese spheres of influence.

The US, conversely, may face reduced influence in India and Asia, grappling with the limits of unilateral economic coercion. India’s rise solidifies the progression toward a multipolar world order where emerging economies assert strategic priorities beyond traditional Western alignment.

It is evident that the US 50 percent tariffs are not merely a trade issue but a pivotal moment shaping India’s economic trajectory, geopolitical orientation, and the evolving US-India relationship amid a shifting global landscape. US must also be cautious that short term economic benefits shouldn't deter or dent long term strategic collaboration.