Tariffs. You’ve probably heard the word on the news or read about it online, especially in the context of trade wars between countries. But what exactly are tariffs? And how are they affecting India right now in 2025?
Let’s break it down so that anyone—student, working professional, or curious reader—can understand what’s happening and why it matters to you.
What Are Tariffs?
Think of tariffs as a tax one country puts on goods coming from another country.
Imagine you’re buying a T-shirt from the US. If the US government decides to impose a 25% tariff on Indian-made T-shirts, that means the American buyer has to pay 25% more on top of the original cost.
So why would a country do that? A few reasons:
- To protect its own industries from foreign competition
- To punish another country for a political or economic reason
- To influence international behavior, such as foreign policy decisions
In short, tariffs make imported goods more expensive, often to give local businesses an advantage or to pressure other governments.
What’s Happening in 2025?
In 2025, the United States has sharply increased tariffs on Indian products, especially on things like clothing, leather goods, gems, and auto parts
- Before 2025: Average US tariff on Indian goods was just around 2.4%
- Now in 2025: That rate has jumped to over 20%, even up to 25% for many key products
This change didn’t happen in isolation. One big reason is India’s continued purchase of Russian oil, which the US doesn’t support due to its sanctions on Russia. As a result, the US has responded by raising tariffs on Indian exports.
How Does This Affect India’s Economy?
Let’s look at the bigger picture first, and then we’ll zoom into specific industries and people.
1. Slower Economic Growth
Economists say these tariffs could reduce India’s GDP (Gross Domestic Product) growth by 0.2 to 0.3 percentage points this year. That may sound small, but when you’re dealing with an economy as big as India’s, it’s a major hit.
India was already expected to grow slower this year—around 6 to 6.4%. Tariffs could pull that number down further.
2. Rupee and Stock Market Under Pressure
As global investors worry about these trade tensions, the Indian rupee has weakened, and the Sensex (stock market index) has dipped. This shows a loss of confidence and rising uncertainty.
3. Risk of Trade Deficit Widening
India may find it harder to sell goods abroad, while it continues to import essentials like oil and electronics. This creates a trade imbalance, meaning we’re spending more than we’re earning from exports.
Which Indian Industries Are Hit the Hardest?
Not all sectors are impacted equally. Here’s how it breaks down:
1. Textiles and Apparel
India exports a lot of clothes to the US. In fact, over one-third of India’s garment exports go to the US.
Now, with a 25% tariff, Indian clothes are suddenly more expensive in the US than similar products from Vietnam or Bangladesh.
Result: Indian exporters may lose orders, and smaller factories could face losses or even shut down.
2. Gems, Jewelry, Leather, Auto Parts
These are all labor-heavy, export-driven sectors. Many American companies may now turn to other countries that offer cheaper alternatives.
This is especially worrying for the thousands of workers and small businesses that rely on these orders for income.
3. MSMEs Under Stress
Micro, Small, and Medium Enterprises (MSMEs) that export goods—especially for seasonal markets like Christmas—are struggling to stay afloat.
They face delays, fewer orders, and difficulty getting loans. For many, it’s a question of survival.
Are Any Sectors Safe (For Now)?
Yes. A few sectors are less affected for now:
- Pharmaceuticals and petroleum products are still enjoying temporary exemptions.
- This means they can continue exporting without the new tariffs—for now.
Broader Impact on the Common Man
Inflation and Higher Prices
If Indian exporters face trouble, they might cut jobs or lower wages. This affects household incomes.
At the same time, American consumers may have to pay more for Indian products, which could add to inflation in both countries.
Investment Uncertainty
With trade tensions rising, foreign investors may hesitate to put money into Indian businesses, especially export-driven ones.
This can hurt the long-term growth of industries and startups.
Why Is the US Doing This?
The increase in tariffs is not just about trade—it’s also about geopolitics.
The US is unhappy that India continues to buy oil from Russia, which is under sanctions due to ongoing global tensions.
By raising tariffs, the US is trying to send a message and pressure India to change its foreign policy stance.
What’s the Indian Government Doing?
The government is exploring several options:
- Incentives for exporters to reduce the damage
- Looking for new markets like Europe, the UK, and Southeast Asia
- Ongoing diplomatic talks with the US to reduce tensions and seek tariff relief
Indian exporters are also adapting—some are shifting focus to domestic markets or countries where tariffs are lower.
In Summary
Tariffs may seem like a policy tool used by governments, but in reality, they impact workers, exporters, and ordinary people.
In 2025, the US’s sharp tariff hike on Indian goods is already:
- Slowing down economic growth
- Hurting key industries like textiles, leather, and gems
- Causing uncertainty for investors and small businesses
- Increasing the strain on the Indian rupee and trade balance
Unless global trade relations stabilize, these tariffs could become a long-term hurdle for India’s export-driven growth story.
Final Thought– Tariffs are not just numbers on paper. They affect real businesses, jobs, and livelihoods. Whether you’re a policymaker, a business owner, or simply someone trying to understand the economy better, this is a story worth following closely.
In this dynamic environment, every rupee you can earn matters, and you can earn cashback on daily purchases with UPI Credit Card.
