In August 2025, the trade relationship between India and the United States took a serious hit. The U.S. government announced an extra 25% tariff on several categories of Indian goods. This was in addition to existing tariffs, meaning that some products now face a total duty of up to 50% before they even enter the American market.
While the U.S. says this will protect local jobs and industries, the impact for India goes much deeper. These tariffs are not just about trade, they affect export revenues, job security, the value of the Indian rupee, foreign investment and even how small businesses get loans through India’s growing fintech industry.
US Tariff Impact on Goods – 2025
| Date | Event / Announcement | Key Details |
| August 1, 2025 | Initial 25% tariff in effect | Total: 10% baseline + 15% reciprocal duty. |
| August 7, 2025 | Executive order signed | Confirms 25% tariff; exemptions for pharma, electronics, and non-Russian energy. |
| August 27, 2025 | Additional 25% applied | Tariffs rise to 50% on most goods (except exempt sectors). |
| October 5, 2025 | Grace period ends | Goods shipped before Aug 7, arriving before Oct 5 taxed at 25%, not 50%. |
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What is a Tariff and its Affect on Indian Exports
A tariff is a tax charged by one country on goods imported from another country. Importers pay it, but the extra cost is usually passed on to the customer.
Countries use tariffs for two main reasons:
- To protect domestic industries by making foreign products more expensive, so people buy more local goods.
- To earn revenue for the government through import taxes.
| Example: If Indian steel costs $1,000 per tonne, a 25% tariff means U.S. buyers pay $1,250. If the tariff increases to 50%, they pay $1,500. This price jump makes Indian steel less attractive, and U.S. buyers might start ordering from countries with lower tariffs. |
US Tariffs on Indian Exports
The new U.S. tariffs affect around 55% of India’s total exports to America. Since the U.S. is India’s largest single-country trading partner, this change impacts billions of dollars in trade.
Industries hit the hardest:
- Textiles and Apparel: A $17 billion export industry with major hubs in Tiruppur, Panipat and Ludhiana.
- Gems and Jewellery: About 30% of India’s jewellery exports go to the U.S., much of it from Surat.
- Marine Products (Shrimp): India is the largest supplier of shrimp to the U.S.
- Leather Goods and Carpets: Important for rural and small-town jobs.
Industries exempt from tariffs:
- Pharmaceuticals: India supplies essential medicines to the U.S.
- Smartphones and Electronics: Likely exempt because of U.S. supply chain needs.
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Sector-Wise Tariff Impact on Indian SMEs
Indian SMEs and MSMEs are most vulnerable because they operate on thin margins and rely heavily on U.S. orders.
| Sector | FY25 Export Value to U.S. | Key Tariff Effects |
| Textiles & Apparel | $8.4 billion | Loss of competitiveness, large order cancellations, risk of factory closures |
| Gems & Jewellery | $10 billion | Exports unviable for low-margin items, job losses in diamond hubs |
| Shrimp | Not disclosed | Higher tax burden reduces demand, market share loss to Ecuador |
Textiles & Apparel
- Employs over 45 million people, mostly women.
- Orders are shifting to Bangladesh, Sri Lanka and Vietnam.
- Many small units risk closure within months if no relief is provided.
Gems & Jewellery
- Employs around 5 million workers in hubs like Surat and Jaipur.
- Thin margins make absorbing tariffs impossible.
- 1 lakh jobs already lost in Gujarat’s diamond polishing units.
Shrimp Exports
- India is now among the highest-taxed shrimp suppliers to the U.S.
- Buyers are switching to Ecuador, where tariffs are lower.
Impact of Tariffs on the Indian Economy
The impact of tariffs on the Indian economy is wide-ranging:
- Drop in Export Orders: When Indian goods become more expensive in the U.S., buyers look for cheaper alternatives from other countries like Vietnam or Bangladesh.
- Slower GDP Growth: Economists expect the new tariffs to reduce India’s GDP growth by 0.8 percentage points, which could push it below 6% in 2025–26.
- Job Losses in Key Sectors: Surat’s jewellery industry alone could see tens of thousands of job cuts. Textile hubs could also face reduced working hours and fewer new hires.
- Pressure on the Rupee and Inflation: With fewer exports, the rupee could weaken. This makes imports like crude oil more expensive, which can push up fuel and transportation costs for everyone.
- Lower Foreign Investment: Investors prefer stable trade relationships. Tariff disputes make them cautious about putting money into export-focused businesses.
Tariff Impact on SMEs and the Fintech Loans Sector in India
The impact of US tariffs on Indian SMEs is deeply linked to the fintech loans sector, as many small and medium-sized businesses depend on quick, digital financing to maintain operations, manage inventory, and fund exports. The ripple effects of reduced US demand directly shape borrowing patterns, repayment capacity and lending strategies in the fintech space.
When U.S. orders drop:
- Loan demand declines: With fewer export orders, SMEs scale down production. Lower production means reduced need for working capital, leading to fewer loan applications. For fintech lenders, this could result in a drop in disbursement volumes, especially in export-heavy clusters like Tiruppur (textiles) or Surat (diamond polishing).
- Higher risk of loan defaults: SMEs facing slower sales and tighter margins may struggle to meet repayment schedules. This increases the risk of overdue accounts, especially for unsecured loans. Fintech lenders that have a large share of export-oriented clients may face rising Non-Performing Assets (NPAs).
- Shift in lending focus: To reduce risk, fintech companies may redirect lending towards businesses with strong domestic demand, such as FMCG suppliers, healthcare-related SMEs and e-commerce vendors. This helps them maintain steady loan growth while avoiding overexposure to vulnerable export sectors.
- Opportunities for new market funding: Not all outcomes are negative. SMEs seeking to diversify into new export markets or pivot to domestic sales will need funds for marketing, logistics and capacity upgrades. This creates fresh opportunities for fintech lenders to offer personalised loan products, such as market-entry financing or supply chain loans, to help businesses transition.
In short, while US tariffs create immediate challenges for SMEs and their lenders, they also push both sectors towards innovation, market diversification and smarter credit risk management.
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Impact of US Tariffs on Indian Individuals
While much of the discussion around US tariffs focuses on trade and business, these policies also have a direct and indirect impact on everyday individuals in India. The effects can range from changes in prices to job security and access to credit.
- Higher Prices for Imported Goods: Even though the tariffs are on Indian exports to the U.S., they can indirectly raise prices in India too. For example, if exporters face reduced demand abroad, they might shift their products to the domestic market at higher prices to recover costs.
- Job Losses in Export-Oriented Industries: Sectors like textiles, gems & jewellery, and seafood processing employ millions of people. If U.S. buyers reduce orders, factories may cut production or lay off workers, affecting household incomes.
- Reduced Job Opportunities in Related Sectors: Logistics, shipping, packaging and other supply-chain-linked industries can also face a slowdown, reducing new job openings.
- Impact on Salaries and Bonuses: Companies that depend heavily on exports might freeze salaries, cut bonuses or reduce working hours to control costs.
- Slowdown in the Fintech Loan Sector: With MSMEs facing financial stress, loan defaults can rise, leading fintech companies to tighten lending rules. This could make it harder for individuals, especially small business owners and gig workers, to get quick loans.
- Effect on the Indian Stock Market: Export-heavy companies’ stock prices may drop, affecting investors and retirement portfolios. Individuals with SIPs or mutual funds tied to these sectors could see lower returns in the short term.
- Ripple Effect on Local Businesses: When exporters lose revenue, their reduced spending can trickle down to local suppliers, service providers and even retail shops, impacting everyday livelihoods.
Government Measures to Reduce the Impact
To cushion the blow of the steep 50% US tariffs and protect India’s export-driven sectors, the government has rolled out a mix of financial aid, market diversification efforts and logistical support.
1. ₹4,000 Crore Credit Guarantee Scheme
The government has allocated ₹4,000 crore under a special Credit Guarantee Scheme designed to support small exporters and businesses under financial stress.
- Loan Coverage for Small Exporters: The scheme guarantees up to 75% of loans taken by small exporters, reducing the risk for lenders and making it easier for businesses to access working capital.
- Relief for Stressed Accounts: For exporters facing severe liquidity issues, the scheme also covers 10–15% of stressed loan accounts, helping them stay afloat and meet short-term obligations.
This measure ensures that even in times of reduced orders or delayed payments, exporters can still secure the financing they need to operate.
2. Finding New Export Markets
Reducing dependence on the U.S. is a top priority. The government is actively promoting trade ties with:
- ASEAN Countries (like Indonesia, Vietnam and Thailand)
- UAE and Australia under recently signed Free Trade Agreements
- Japan for high-value goods and specialty manufacturing
- African Nations for agricultural products, textiles and consumer goods
These efforts include bilateral trade talks, investment in trade fairs and targeted export promotion campaigns, ensuring Indian goods find new buyers in high-potential markets.
3. Financial and Logistical Support for Exporters
To help exporters adapt to shifting trade routes and meet new market requirements, the government is offering:
- Freight Subsidies: To offset rising transportation costs, especially for goods that must now be shipped to more distant markets.
- Funding for International Certifications: Many markets require certifications like ISO, HACCP or CE marking. The government is subsidizing these costs so exporters can meet the technical standards of new markets without heavy upfront expenses.
Conclusion: The Road Ahead for India’s Export Market
The US move to impose tariffs of up to 50% on Indian exports is a major trade shock, hitting sectors like textiles, gems & jewellery and shrimp the hardest. Beyond trade, the impact is spilling into fintech lending, the stock market and household incomes.
Yet, this challenge also opens doors for diversifying export markets, boosting domestic demand and accelerating SME digital adoption. With targeted government support, agile business strategies and financial sector innovation, India can not only weather the storm but strengthen its position in global trade with greater resilience and self-reliance.
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