Trump attempts to arm-twist India, but Americans may soon start feeling the tariffs heat

US President Donald Trump’s whopping 50 per cent tariffs on Indian goods came into effect on Wednesday, casting a heavy shadow on the India-US ties. The tariffs not only impact trade worth billions between the two nations but also risk thousands of jobs in the world’s most populous nation.

On July 30, the US first slapped a 25 per cent tariff on India, complaining about New Delhi’s ‘unfair trade practices’. A week later, Trump announced an additional 25 per cent tariffs, calling it a penalty on India for purchasing Russian oil.

Soon after the announcement, New Delhi condemned the duties and called out the Trump administration’s double standards, since China purchases more oil from Russia than India, but no such penalties have been imposed on Beijing.

According to the Office of the US Trade Representative, the US imported more than $85 billion goods from India in 2024. Not only this, but two-thirds of the largest US companies have operations in India. While Trump tariffs are likely to hit the Indian exporters significantly, pockets of the Americans would be affected as well. Here’s a look at how the US will feel the heat of the tariffs its president imposed on India.

Increase in prices: A dent in American pockets

One of the immediate impacts of Trump’s tariffs on Indian goods would be a rise in prices of these products for the consumers. Since American companies would have to pay higher duties for the Indian goods they acquire, they will recover this cost by increasing the price of the products.

Prices of textiles, gems, seafood, and leather footwear and handicraft products will shoot up, and Americans will end up paying more if they want to purchase Indian products. According to a study by Yale University in July, high tariffs imposed by Trump on allies such as India and South Korea would result in a major increase in household expenses and a slowdown in economic growth.

The university notes that the Trump tariffs are expected to result in an average short-term income loss of about $2,400 per American household. “The Trump tariff led to an average effective tariff rate of 18.4 per cent on affected products – the highest seen in the US since the 1930s,” the Yale researchers noted.

Inflationary pressure

Major financial institutions and experts warned that the new tariffs on India could lead to higher inflation in the United States. According to a report released by the State Bank of India, US GDP growth could be reduced by 40-50 basis points as a result of the new duties.

Inflationary pressures are likely to rise due to higher input costs and a weaker dollar. “We believe that US tariffs are likely to affect US GDP by 40-50 bps along with higher input cost inflation,” the report noted. The SBI analysis projected that inflation in the US will stay above the Federal Reserve’s 2 per cent target through 2026, driven by tariff pass-through and exchange rate movements.

The SBI report also warned that if the 50 per cent tariffs extend to all $45 billion of Indian shipments, New Delhi’s trade surplus with Washington could potentially flip into a deficit.

Supply chain disruption

So far, the US companies have taken the bulk of the hit from Trump tariffs, but sooner or later, the burden will increasingly be passed to consumers as companies hike prices. However, another problem will slowly criple the US economy due to the Trump tariffs.

India is a key player in global pharma, chemicals, and IT services. But heavy duties on India also risk slowing supplies, creating shortages in critical sectors. Industries that rely on Indian components, materials, or intermediate goods may face higher input costs and supply chain disruptions, potentially impacting their production and competitiveness.

While the tariffs would result in American companies shifting their sourcing to other nations, it cannot be done by waving a magic wand and hence would take a toll on the American supply chains.

• Shrimps and Textiles will take the hit

The increased tariffs would particularly impact the shrimp and textile industries. India is one of the leading suppliers of seafood to the US. Shrimp farmers in the southern Indian state of Andhra Pradesh are facing the squeeze of the tariffs.

While American companies are turning to other nations, they might struggle with the limited scalability that these nations have, in comparison to India, which has a solid manufacturing sector. The location changes could also result in a change in the price markers presented to American consumers.

Threats of tariff expansion: Healthcare sector

India’s share in the export of pharmaceuticals to the US is a whopping 36 per cent. While the Pharma sector is exempted from the tariffs if Trump decides to charge duties on the Indian exports, it would affect the American healthcare sector significantly.

Tariffs could increase drug prices, straining insurance & public health budgets. A similar impact could be felt in the tech sector. India supplies software, IT services, and back-office support. An expansion of duties or any form of retaliation from India may raise costs for US companies relying on outsourcing.

Risk of retaliation and geopolitical shift

Officially, India has largely ruled out immediate retaliation, opting instead to pursue trade negotiations with the US. However, the trade talks have stalled after Trump announced the penalty tariffs. India has, however, signalled its legal right to retaliate, formally notifying the WTO of its intent to respond in kind to certain tariffs.

In July, India informed the WTO of plans to impose retaliatory duties on the US autos and auto parts—matching estimates of up to $725 million in US duties—while preserving its right to suspend equivalent trade commitments. However, New Delhi is also aware that such retaliation would be hard for Indian consumers as well.

Instead, New Delhi has decided to strategically align itself with countries like Russia, China and Brazil, something which might not sit well with the American foreign policy. Prime Minister Narendra Modi is on an Asia tour with China and Japan to bolster economic and strategic cooperation, diversifying away from US-centric ties.

In an interview with _Firstpost_ earlier this month, Trump’s former National Security Advisor John Bolton noted that Trump handed a gift to China by imposing tariffs on India.

Bolton said: “In terms of border disputes and China’s general hegemonic ambitions, India would have been well within its rights to consider China the principal adversary. But when it comes to dealing with the US on trade, this [Trump tariffs] has given China a gift to say, ’look, you’re in as much danger as we are. Why don’t we get together?’”

“I’m sure that’s what Xi Jinping is going to be proposing. Russia is somewhat different, given the history. I think in India, there was a developing understanding that Russia grew closer to China. India was facing a problem with that Axis.”

“All of that has been reversed, or at least severely called into question. It’s an example of how Trump thinks of one thing at a time and doesn’t think of the consequences. So the one thing he was thinking of was a ceasefire in Ukraine, which he wasn’t getting from Russia. He took steps that had probably even greater negative implications for the United States elsewhere, particularly with India,” the former US NSA explained.

While US Treasury Secretary Scott Besent maintains that the doors to trade deals remain open. One thing remains clear: US tariffs on India would affect Americans as well.

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