Who Stands More to Lose in the Tariff Standoff Between India & the US (and What It Means for Trade)

What Changed in August

In August 2025, the Trump White House added a 25% tariff on most Indian goods, then on August 27 raised applied rates to as high as 50% on many categories. The move was framed as punishment for India’s ongoing purchases of discounted Russian crude during the Ukraine war. New Delhi pushed back and said it would buy energy where the economics work. Smartphones and pharmaceuticals are among the notable carve-outs, for now.

The 50% rate has taken effect (as of September 2025), with reports of transitional treatment for shipments already en route and implementation keyed to customs codes. Coverage varies across sectors, with labor-intensive exports like apparel, gems and jewelry, shrimp, furniture, carpets, and some chemicals facing the steepest hit.

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The Baseline & How the Two Economies Trade

Goods trade in 2024 totaled about $129 billion. The United States imported roughly $87.3 billion in goods from India and exported about $41.5 billion, leaving a sizable U.S. goods deficit. Services trade sat near balance in 2024, per congressional briefings.

The U.S. accounted for a whopping 18% of India’s merchandise exports in FY2023-24, making it India’s top market. For the United States, India supplied roughly 2.6% of total goods imports in 2024, a relatively small share of overall U.S. sourcing.

What India sells most into the U.S. market includes pharmaceuticals, gems and jewelry, apparel and home textiles, organic chemicals, machinery, electronics, and seafood. What the U.S. sells most to India includes energy products such as crude and LNG, aircraft and parts, machinery, chemicals, and medical instruments.

Who Stands to Lose More if Trade Stalls

India’s exposure is much larger in relative terms. The U.S. is the single biggest outlet for Indian goods, close to one-fifth of India’s merchandise exports. A prolonged disruption would hit export-led jobs in textiles, jewelry, leather goods, and seafood. The U.S. sources a small share of its total imports from India and can substitute many categories from Vietnam, Bangladesh, Indonesia, and others, although there are pockets of sensitivity.

Where the U.S. could feel pain: generics. FDA materials and industry analyses put India’s contribution to U.S. generic drug supply in the ~40% range by volume. Pharma is currently excluded from the tariff list, but any future move here would risk higher U.S. drug prices and shortages.

Energy cuts both ways. India has lifted purchases of U.S. crude at times when pricing works, yet it still buys large volumes from Russia. If talks sour and India tilts away from U.S. barrels and LNG cargos, U.S. energy exporters lose a growth customer, though global buyers can redirect flows (Reuters).

Sector ‘Heat Map’ Showing Where the Tariffs Bite First

• Apparel and home textiles. Highly price-sensitive, with abundant alternative Asian suppliers. Expect rapid buyer shifts in U.S. retail sourcing calendars.
• Gems and jewelry. India is the world’s main diamond polisher and a top U.S. supplier. A 50% rate lifts finished jewelry costs and risks layoffs in India’s cutting hubs. Substitution to Belgium, Israel, Thailand has limits on capacity and price (The Wall Street Journal)
• Seafood, especially shrimp. Ecuador is already gaining U.S. share; higher Indian duties accelerate the switch (S&P Global).
• Chemicals and certain machinery lines. Margin pressure rises where inputs were already tight or subject to prior duties.
• Pharmaceuticals. Currently spared, but the sector is watching Washington closely and diversifying export destinations as a hedge.

What it Means for Businesses and Consumers

Pricing will move first in categories with thin margins and easy substitutes. Apparel basics, fashion jewelry, low-end furniture, and farmed shrimp are likely to show the earliest price changes on U.S. shelves as buyers shuffle vendors and rewrite contracts. Indian exporters will chase Europe, Middle East, and domestic channels to soak up capacity; some will not find a soft landing.

Retailers and brands with India-heavy mixes in apparel and home goods should map SKUs to alternate suppliers in Bangladesh, Vietnam, and Indonesia and stagger commitments to avoid overpaying during the switch. Jewelers and luxury houses will need sharper assortment planning to manage higher polished-stone costs. U.S. grocery and foodservice buyers should expect more offers from Ecuadorian and Southeast Asian shrimp producers competing for shelf space.

Drug supply bears watching even if exempt. A policy turn that touches generics would ripple through U.S. healthcare costs quickly. Hospital systems and PBMs should scenario-plan for tariff pass-throughs or supply reshoring incentives that could lift prices.

Energy trade will remain tactical. India has shown it will swing between U.S., Middle Eastern, and Russian barrels based on netbacks. A messy standoff would nudge refiners toward non-U.S. supply, which trims optionality for U.S. exporters (Reuters).

What to Watch Next

1. Whether talks deliver exemptions or rate reductions for labor-heavy Indian categories before peak U.S. holiday shipping. 2) Signs that pharma moves onto or off the watch list in Washington. 3) Evidence of sustained supplier switching in U.S. retail import data and purchase orders. 4) India’s domestic cushioning policies, such as cotton procurement and input duty tweaks that aim to keep mills running.

So India has more to lose near term because the U.S. is its largest market and many of its top exports compete on price with ready substitutes. The U.S. can replace a large share of India-sourced goods, but would face concentrated risk if pharmaceutical exemptions ever narrow. Energy flows give each side leverage, although Indian refiners have multiple paths to meet demand. As of early September, President Modi has met with his counterparts in China and Russia in an apparent bid to reach trade agreements to blunt the impact of the latest U.S. tariffs, complicating the leverage the US has. How this all shakes out, remains to be seen.

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