The August 2025 U.S. Tariff Hike on Indian Exports: Sector-Wise Losses, Employment Impact and Policy Response

This paper evaluates the immediate economic impact of the United States doubling tariffs on Indian exports to 50% with effect from August 27, 2025, a move announced in response to India’s continued crude oil imports from Russia and to protect U.S. industries. Using a partial equilibrium framework with Armington-type demand and sector-specific export elasticities, the study quantifies short-term export losses, employment impacts, and macroeconomic implications. Results reveal sharp contractions in labour-intensive sectors such as textiles, pharmaceuticals, auto components, and IT services, with significant downstream effects on employment, GDP, and sales revenues. The analysis further outlines a four-pillar policy response—export credit support, market diversification, compliance and competitiveness upgrades, and domestic value addition—to cushion the blow and sustain long-term resilience. This timely study provides policymakers and exporters with a clear roadmap to navigate the tariff shock and safeguard India’s economic interests.