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Tariffs

India's Economy Faces Nightmare Scenario as US Tariffs Set to Double

Strategic Insights

— 1 min read

India's economy is staring at a potential collapse as the US threatens to impose a 50% tariff on its exports, more than doubling the current rate of 25%. This move could lead to a massive loss of livelihoods, with an estimated 2.5 million people in the carpet industry alone facing subsistence-level poverty. Other industries such as textiles, garments, aquaculture, and furniture could also suffer similar fates, with millions of workers and billions in revenue at risk.

Key Takeaways:

  • The US tariff on Indian exports is set to double from 25% to 50% on August 27, posing a significant threat to India's economy.
  • The carpet industry, a major contributor to India's exports, is particularly vulnerable, with 98% of its products shipped overseas.
  • The industry employs hundreds of thousands of workers, and a significant increase in tariffs could lead to widespread unemployment and poverty.
  • The US is India's biggest consumer of generic pharmaceuticals, but a proposed tariff of 150% to 250% could lead to the loss of this lucrative market.
  • India's electronics manufacturing industry, exemplified by Apple's shift in iPhone production from China to India, may be severely impacted by US tariffs on semiconductors.
  • Oil and gas exports from India are currently exempt from tariffs, but this may change in the future.
  • India's gems and jewelry industry may also be severely affected, with 30% of the global trade in Indian gems at risk according to the industry's main association.

Statistics:

  • 2.5 million people in the carpet industry are at risk of facing subsistence-level poverty.
  • 98% of India's carpet exports are shipped to the US.
  • India's textile and garment industry employs millions of workers.
  • India's electronics manufacturing industry has seen significant growth, thanks in part to Apple's shift in iPhone production to India.
  • Indian exports to the US were worth $129 billion last year.
  • India is the primary producer of generic pharmaceuticals used in the US.

Sources:

  • "New U.S. taxes on American imports, even at 25 percent, will hurt many Indian businesses and may put vast numbers of people out of work." - The New York Times, August 25, 2025.
  • Interview with Ishtiaq Ahmad Khan, carpet exporter and leader of the industry's trade promotion council.
  • Interview with Kirit Bhansali, chairman of the Gems and Jewellery Export Promotion Council.
  • The New York Times, August 25, 2025: "India's Economy Faces Nightmare Scenario as US Tariffs Set to Double".

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