In August 2025, the U.S. government dramatically increased tariffs on Indian imports, starting with an initially 25% “reciprocal” tariff, followed by an additional 25% related to India’s ongoing imports from Russia, bringing total tariffs to an astounding 50%. These tariffs represent some of the highest tariffs imposed by the U.S. against any trading partner and are severely damaging to India’s export competitiveness.
Timing is also important: the full effect of the 50% tariff is to go into effect on August 27.
Industries on the Edge
Textiles, Gems & Jewelry, Auto Components, Agriculture
- Textiles: As labour-intensive and highly reliant on U.S. demand, the sector is taking the brunt of tariff exposure. R.P. Yadav of Genius HRTech estimates there could be a loss of as many as 100,000 jobs in textiles alone if the tariffs remain in place for more than six months
mint. - Gems & Jewelry: The knock-on effect is being felt with MSMEs working in main hubs like Surat and SEEPZ in Mumbai. Thousands of jobs in these areas are thought to be at risk due to demand declines and rising cost structures
min. - Agriculture & Auto Components: These sectors are often overlooked but also vulnerable. Although specific job figures are, writ large, analysts believe there is a significant risk of job loss and export pressure, and that widespread exposure exists among MSMEs mint.
Overall, estimates indicate there could be 200,000 to 300,000 jobs at risk overall in the sectors listed.
Geography of Risk: States in the Crosshairs
- Rajasthan – Exports of jewellery, handicrafts, and garments in Jaipur are warning that a full 50% duty can threaten almost 1 million jobs in the state, which indicates how fragile U.S. trade is to the local economy.
- Gujarat – Gujarat’s manufacturing clusters in textiles, gems, chemicals, ceramics, and food exports are poised for significant disruption. Exporters are already experiencing order cancellations and margins are squeezed; ceramic exports will come to a screeching halt (particularly ceramic from Morbi) if tariffs go through.
- Gujarat’s Diamond district – The diamond cutting and polishing market in Saurashtra has already lost around 100,000 workers as a result of a 10% baseline tariff implemented early in 2025.
- Punjab – In centres for textile like Ludhiana, CII leaders are referring to the Tariff at a 50% rate as a “death knell”, where ~28% of India’s $35 billion in Textile Exports goes to the U.S, many units face cancelling contracts, and buyers cannot absorb increasing price inflation.
Views from the Experts: Alarm vs Optimism
Risk-averse Perspectives
- R.P. Yadav (Genius HRTech): Warns up to 3 lakh jobs are at risk, mainly in textiles and gems, and particularly in the MSME sector
mint. - Aditya Mishra, CEO of CIEL HR, is thinking that even indirect sectors (pharma or electronics) will feel the effects of rising raw material prices and are already making decisions by freezing hiring and cutting expenses.
Resilient Perspective
- Balasubramanian Anantha Narayanan (TeamLease Services): Contrary to the alarmist perspective, he believes India is a domestic-consumption driven economy which is not the case with China; The U.S. is taking roughly $87 billion of exports (~2.2% of India’s GDP), so if that goes south then that will limit broad-based impact. The pharmaceuticals and electronics sector is relatively insulated mint.
The risks may also be relieved by sudden changes to policies, trade negotiations, or delays in the slower-than-expected process of implementing tariffs (rather than the perfection of tariffs penalties on August 27).
Structural and Financial Remedies
Banking Assistance Initiatives
Indian banks are stepping up and providing liquidity support mechanisms:
Indian Bank: Interest rebates, waivers such as loan processing fees, forex handling fees, collection charges, customized working capital lines, and export insurance support–especially in a region like Tirupur and Surat, who have many MSME exporters.
Indian Overseas Bank (IOB): They are advising on market diversification, reorientation of products, and hedging against forex volatility. They are also monitoring the government’s initiatives to provide support where possible.
Tamil Nadu Chief Minister M.K. Stalin has reached out to the central government to establish interest subvention schemes, a moratorium on loan principal repayments, rationalize GST for man-made fiber to a single 5% slab, and to eliminate import duties on cotton to help alleviate the tariff shock considering that the state imports U.S. 31% of its textiles and contributes globally to 28% of textiles overall.
Strategic Imperatives & Future Outlook
- Diversifying Markets: Tariffs have forced exporters to find new destinations (e.g. EU, UK, ASEAN, Africa etc.) according to banks and state industry leaders.
- Accelerating and Finalizing FTAs: Industry heads, particularly in Punjab, are trying to accelerate the finalization of FTAs with the EU, UK, Canada and Brazil providing alternatives to the over-reliance on the U.S. market (The Times of India).
- Long Term Opportunities in Crisis: As per analysts like Sunil Sanghai, exporters should see that this situation provides a window for reform – of infrastructure, policy, trade and investment flows and export diversification to allow Indian manufacturing to become more resilient and broad-based.
- Geopolitical Consequences: The tariffs might complicate U.S.-India diplomatic and defense relations, which could be a practical reason for India to explore trade and strategic relationships elsewhere, pushing to develop them further.
Concluding remarks
The U.S. decision to increase tariffs was up to 50% on goods poses a significant threat to hundreds of thousands of jobs in India primarily related to textiles, gems & jewellery and other labour-intensive goods in key areas such as Rajasthan, Gujarat, Punjab, and Mumbai. While there are voices across industry that warn of major ructions, there are others who mentioned the protection effect of India’s large domestic market and the scope for diversifying production.
Whether there is a lasting impact, it will depend in part on the policy responses to the shock (which could include fiscal and trade-related shocks) along with banking help and speedy free trade agreements.
