In September 2025, Prime Minister Narendra Modi used the phrase “unlock the limitless potential of the India-US partnership” in a social media put up on X, referencing renewed commerce talks with the US. This assertion adopted months of heightened commerce tensions between the 2 nations. Modi’s put up was in reply to US President Donald Trump’s announcement that the US and India had been resuming commerce negotiations. In his message, Modi referred to India and the US as “shut mates and pure companions”. He expressed confidence that the negotiations would succeed and famous that groups from either side had been working to conclude discussions “on the earliest”.
Trump’s tariffs have considerably impacted India by lowering its exports to the US, damaging labour-intensive sectors, and straining diplomatic relations. The US imposed a 50% tariff on many Indian items in August 2025, with half of the levy serving as a penalty for India’s continued buy of Russian oil.
In response to the International Commerce Analysis Initiative, Indian items exports to the US plunged by 37.5% between Might and September 2025. The commerce drop erased over $3.3 billion in month-to-month commerce, with September being the primary full month underneath the 50% tariff.
Labour-intensive industries that rely closely on the US market have been hit hardest. These embody textiles, gems and jewelry, leather-based items, and engineering merchandise. Some Indian exporters have grow to be priced out of the US market, with corporations both closing, relocating to lower-tariff nations, or redirecting items to completely different markets.
Within the quick time period, the tariffs have contributed to volatility within the Indian inventory market and weakened the Indian rupee in opposition to the US greenback. In response, India has not retaliated with its personal tariffs however is specializing in diplomatic engagement, market diversification to different areas, and supporting affected sectors.
Probably the most important influence has been on labour-heavy sectors, which have suffered the heaviest losses. Economists warn that the tariffs might cut back India’s GDP progress by 0.5% to 0.8%. Whereas India’s total financial efficiency has remained resilient because of market diversification, the casual sector, which employs hundreds of thousands, is especially weak. The casual sector in Indian business is a significant element of the financial system, characterised by an unlimited workforce of over 90% of all staff who lack social safety and authorized protections.
The tariffs, notably the penalty portion associated to Russian oil, have strained US-India relations. Whereas bilateral commerce talks are ongoing, the Indian authorities has firmly rejected Trump’s claims that Modi has agreed to cease shopping for Russian oil. India has reportedly proven a willingness to extend US vitality purchases, however a whole halt of Russian imports is unlikely.
Trump’s tariffs on India have additionally led to larger costs for American customers, squeezed US small companies, and prompted US corporations to shift their provide chains. Indian items like textiles, jewelry, spices, and seafood are actually considerably costlier. Companies have absorbed some prices, however a lot of it’s being handed on to customers.
The seafood business is especially affected, as India is a number one provider of shrimp to the US. Larger attire prices are additionally impacting clothes costs. Many US companies, together with a whole bunch of Indian-American companies that depend on Indian imports, are combating the upper prices. To keep away from the upper prices, some American companies are shifting their sourcing to different nations like Vietnam, Bangladesh, and Ecuador.
Whereas either side have continued negotiations and expressed a want to spice up long-term commerce, the diplomatic disaster has heightened tensions. The standoff has been described as probably the most difficult intervals for the connection in twenty years. It has led to diplomatic friction and concern that the belief constructed over generations could possibly be broken. Within the face of US tariffs, India is proactively diversifying its export markets to cut back its dependence on the US, with some success in different areas. India’s technique of diversifying its export markets helps to mitigate the influence of the US tariffs, displaying some resilience in its total export efficiency.
Regardless of the tensions, negotiations proceed with key gadgets on the agenda. Indian and American negotiators proceed discussions on market entry for agricultural items and different merchandise. India’s commerce minister has reiterated the necessity to shield the pursuits of Indian farmers and small-to-medium enterprises. India has reportedly supplied to extend its purchases of US oil and fuel to slim the commerce deficit, whereas defence cooperation can also be a subject of negotiation.
India is unlikely to conform to a “wholesale opening” of its agricultural sector because of the potential political and financial influence on its farmers. India can doubtlessly supply concessions within the agricultural sector to the US by permitting restricted imports of genetically modified animal feed and rising market entry to particular merchandise reminiscent of sure fruits like apples, dry fruits and edible oils. Nevertheless, concessions on main commodities like corn, soybeans, wheat, and dairy stay a sticking level because of home considerations and current import restrictions on GM crops. India has proven willingness to permit the import of GM corn to be used as animal feed, however not for human consumption.
Probably the most fast path to de-escalation entails resolving the Russian oil situation. Furthermore, as an alternative of a complete free commerce settlement, a extra life like final result is a phased deal. A possible first tranche of the settlement could possibly be finalised in the direction of the top of 2025, although talks are usually not sure by a strict deadline.
Summing up, whereas there are optimistic experiences of narrowing variations and constructive talks, the brand new tariffs and underlying geopolitical points create a difficult atmosphere for a swift decision. The long-term outlook for India-US commerce relations is advanced. Whereas geopolitical and financial logic helps a stronger partnership, the imposition of tariffs and diplomatic friction over strategic variations poses a big threat to future progress. The end result of the commerce talks will resolve whether or not cooperation or protectionism defines the connection transferring ahead.