India Faces Major Export Setback As 50% US Tariffs Render Goods Uncompetitive, Warns FIEO

India’s exporters are bracing for a severe shock as the US government’s additional 25% tariff on Indian-origin goods takes effect from Aug. 27, pushing total duties on several categories to 50%.

The move, covering two-thirds of India’s $86.5 billion exports to its largest market, threatens to slash shipments, disrupt supply chains, and trigger widespread job losses across labour-intensive sectors.

The Federation of Indian Export Organisations (FIEO) has called the tariff hike a "setback", warning that $47–48 billion of India’s exports will now face a 30–35% pricing disadvantage, leaving them uncompetitive against rivals from Vietnam, Bangladesh, and China. FIEO President S C Ralhan said production has already halted in textile hubs like Tirupur, Noida, and Surat, while shrimp exporters, who rely on the US for 40% of sales, face stockpile losses and farmer distress. Leather, ceramics, chemicals, handicrafts, and carpets are also vulnerable, he added.

Ralhan urged the government to step in with credit relief, including interest subvention, a one-year moratorium on loan repayments, and automatic 30% limit enhancements for exporters. He also called for fast-tracking FTAs with the European Union, Gulf Cooperation Council, and Latin America, alongside urgent diplomatic engagement with Washington.

A report by the Global Trade Research Initiative (GTRI) warns that India’s exports to the US could plunge 43% in FY26 to $49.6 billion, with apparel, jewellery, shrimp, and carpets falling as much as 70%. This could shave nearly 0.9% off India’s GDP growth, the report said.

"While 30% of exports will remain duty-free and 4% will face a 25% tariff, 66% (worth $60.2 billion) covering apparel, textiles, gems & jewellery, shrimp, carpets, and furniture will be hit with a 50% tariff rendering them uncompetitive," said Ajay Srivastava, founder, GTRI.

However, GTRI noted that resilient services exports and growing global diversification could cushion the blow, with India’s overall exports still projected to edge up 2.3% in FY26.