India Faces Economic Catastrophe as US Tariffs Expose Fragile Foundations

US tariffs devastate India's export sector, risking 200,000 jobs.
India Faces Economic Catastrophe as US Tariffs Expose Fragile Foundations
SHEALAH_CRAIGHEAD
Updated on
2 min read

Export Sector Collapse and Job Losses

Indian exporters are scrambling to survive after President Donald Trump imposed 50% tariffs on $87 billion of Indian goods; a punitive measure targeting India’s reliance on Russian oil. The tariffs, doubling from 25% after India ignored warnings to cut Russian imports, have paralyzed key industries, namely textiles where orders from major U.S. brands like Gap and Kohl’s are shifting to Vietnam and Bangladesh, where tariffs are 20–30% lower. Top exporter Pearl Global faces midnight ultimatums to relocate production outside India. Gems and Jewellery have also been affected, where $10 billion in annual exports has halted, with 200,000 jobs at risk. New orders are frozen, and workshops stand empty as U.S. buyers reject tariff-inflated prices. Seafood has also been affected, where companies like Baby Marine Group lost all U.S. orders, desperately seeking new markets in Russia and China despite lacking established trade channels.

Geopolitical Blunders and Diplomatic Failures

Prime Minister Narendra Modi’s alignment with Russia triggered the crisis. Despite urgent calls from Washington to reduce Russian oil imports, India increased purchases. Modi’s belated calls with Putin and Zelensky, urging “peaceful resolution” failed to appease Trump, who called India’s economy “dead” and its trade barriers “obnoxious”. The tariffs coincide with Trump’s Alaska summit with Putin, where India’s interests were notably absent from discussions.

“Make in India” Lies Exposed

The crisis has shattered Modi’s flagship initiative, "Make in India". Apparel giants Gokaldas Exports and Raymond shift manufacturing to Ethiopia and Kenya (10% tariffs). Titan watches relocated to the Middle East. Even domestic-focused firms like RichaCo explore Nepalese factories. Moody’s warns the tariff gap will reverse years of foreign investment gains. Goldman Sachs predicts a 1% GDP contraction, while Bloomberg Economics forecasts 60% export drops to the U.S. The currency plunged to 87.74/USD, near its historic low as markets reacted to India’s isolation.

Human Toll and Government Inaction

Workers bear the brunt of Modi’s miscalculations. In Tiruppur, “knitwear capital of India,” factories redeployed staff to ship goods before the August 27 deadline. Smaller exporters face bankruptcy, with 15,000 jobs at risk at Creative Group alone. Industry pleas for export incentives, duty drawbacks, and loan deferments go unanswered. The Confederation of Indian Textile Industry begged for “fast-tracked support,” but Modi’s government offers only vague promises. Garment laborer Lalit Thukral calls the tariffs “worse than Covid,” noting, “At least the pandemic had an end; this is a death sentence”. As exporters warn of “chaos” and “standstill,” India’s economic model lies in ruins, a self-inflicted crisis born of strategic delusion and diplomatic incompetence.

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