Economic slump looms over Indian labor force under Trump's import taxes
The United States' decision to impose 50% tariffs on Indian exports, effective August 27, 2025, is set to have severe negative impacts on several key Indian industries. These industries include the diamond (gems and jewelry), textile, and automotive sectors.
In the gems and jewelry industry, which contributes about $10-12 billion annually and accounts for roughly 30–33% of India's global gems and jewelry exports, the new tariffs will significantly increase costs. Previously, cut and polished diamonds faced zero tariffs, and gold jewelry had 5-7% tariffs; the new 50% duty will impose a sharp increase. This is estimated to cause a 15% decline in exports, translating to losses of $1.8 billion to $2 billion. Industry leaders warn of a "doomsday" scenario with potential millions of job losses, supply chain disruptions, and shipment delays.
The textile industry, though specific figures are not provided in detail, is also targeted under these tariffs. The tariffs could lead to order cancellations and reduced competitiveness, potentially driving buyers toward other exporters like Vietnam and Bangladesh. Labor-intensive sectors such as textiles are especially vulnerable to these tariffs, worsening employment and export volume.
The automotive industry, while direct data on automotive exports are not detailed, is generally sensitive to high tariffs. The 50% tariffs effectively double previous duties, making Indian automotive products less competitive and likely causing export reductions and financial losses.
Overall, these tariffs could reduce India's GDP growth by 0.2% to 0.6%, triggering export losses of $5 billion to $8 billion across sectors, with labor-intensive industries bearing the brunt. Additionally, the tariffs could prompt strategic shifts such as Indian exporters reconsidering manufacturing bases or shifting sourcing to regions with more favorable trade terms.
India was one of the first countries to initiate trade and tariff talks with the second Trump administration. Lekha Chakraborty, a professor at the National Institute of Public Finance and Policy in New Delhi, stated that short-term, sector-specific setbacks will be massive if economic diplomacy fails to avert the high tariff rate. Chakraborty suggested that India can overcome the crisis by diversifying its trading partners and attracting more foreign investment.
The Indian government could provide relief to affected sectors, such as credit guarantees and loan moratoriums for small and medium enterprises. The US is India's single largest market for exports, accounting for over $10 billion in exports, nearly 30% of the industry's total global trade.
In the textile city of Tiruppur in the southern state of Tamil Nadu, millions are employed in knitwear and garment factories. About 30% of Tiruppur's exports go to the US, particularly in the cotton and knitwear segment, amounting to $5.1 billion in the last financial year. The tariffs threaten 100,000-200,000 job losses if exports contract in the coming months.
The US has imposed a 50% tariff on Indian exports, including gems, textiles, automotive parts, and footwear. Electronics, smartphones, and pharmaceuticals remain exempt. The Diamond Workers Union Gujarat estimates there are about 800,000 to 1 million diamond workers in Gujarat. US President Donald Trump ordered additional tariffs on Indian exports, particularly affecting the jewelry and textile industries.
India is actively engaging in ongoing trade talks with the US to find diplomatic solutions and de-escalate trade tensions. The tariffs threaten a significant portion of India's export economy to the US, valued at nearly $87 billion annually, representing about 2.5% of India's GDP.
- The world is closely watching the impacts of the United States' 50% tariffs on Indian exports, particularly in the gems and jewelry, textile, and automotive sectors.
- In the personal-finance realm, the new tariffs could cause a 15% decline in gems and jewelry exports, translating to losses of $1.8 billion to $2 billion.
- The international finance community is concerned about the potential millions of job losses in the Indian economy due to these tariffs.
- The government and policy-and-legislation bodies in India are considering providing relief to affected sectors, such as credit guarantees and loan moratoriums for small and medium enterprises.
- The general news is filled with reports of reconsideration by Indian exporters regarding their manufacturing bases, looking to areas with more favorable trade terms.
- In the retail sector, the tariffs threaten 100,000-200,000 job losses in Tiruppur, a textile city in India, if exports to the US contract in the coming months.
- The automotive industry is also expected to suffer financially due to the new tariffs, with export reductions likely as foreign investment may be diverted to regions with more favorable trade terms.
- US-India trade talks are ongoing, focused on finding diplomatic solutions to de-escalate trade tensions and prevent negative impacts on both economies, including wars-and-conflicts and the overall business relationship.
