Exporters warn that sweeping U.S. duties—totalling up to 50% on a majority of Indian goods—could derail New Delhi’s bid to build a supply-chain alternative to China.

NEW DELHI — India’s signature industrial push, “Make in India,” is colliding with a new and abrupt headwind: import duties in the United States that now total as much as 50% on large swaths of merchandise. The tariff shock—announced in successive steps this month by the Trump administration—has set off alarms across India’s export corridors, from the textile hub of Tiruppur to the diamond traders of Surat and the seafood processors of Andhra Pradesh. Business leaders warn the levies could undercut the country’s hard‑won gains as a China‑plus‑one manufacturing base and jeopardise orders ahead of the crucial U.S. holiday selling season.

What happened

Washington’s move layers fresh punitive duties on top of existing tariffs, lifting the combined rate to around 50% for a broad basket of Indian goods. New Delhi estimates that roughly 55% of India’s merchandise exports to the U.S. now fall under the new regime—potentially affecting well over $60 billion in annual shipments. The administration framed the escalation in part as a response to India’s continued purchases of Russian oil and to long‑running trade frictions.

Why this matters for ‘China‑plus‑one’

For half a decade, global boardrooms have been rewiring supply chains to reduce reliance on China. India has emerged as the marquee alternative, rolling out production‑linked incentives (PLIs), speeding up clearances and courting anchor investors in electronics, renewables and specialty chemicals. The United States—India’s single biggest export market, accounting for roughly 18% of merchandise sales in 2023‑24—has been central to that strategy. A tariff wall of 50% risks dulling the price advantage India has used to lure orders away from China and Southeast Asia.

Sectors on the front line

Textiles and apparel are first in the firing line. Exporters in Tamil Nadu and Gujarat say U.S. buyers are already asking to shift orders to Vietnam and Bangladesh. Home‑textile majors and garment makers—many deriving 40% to 70% of revenue from the U.S.—have placed hiring and capacity plans on hold. In gems and jewellery, one executive describes the tariff as “worse than COVID,” warning of job losses across polishing clusters just as demand was starting to recover.

Seafood, a quiet export powerhouse, faces its own reckoning. The U.S. buys more than a third of India’s marine exports by value—dominated by farmed vannamei shrimp—which means even a temporary tariff shock can wipe out margins for small and mid‑sized processors. State governments along the east and west coasts have begun urging exporters to diversify to West Asia and Africa, but such pivots take time.

Engineering goods and auto components are bracing for margin compression, as are leather and carpets. Pharmaceuticals—one of India’s strongest export franchises—remain less exposed near‑term because many finished drug products are excluded, but inputs and devices could see pressure depending on final tariff schedules.

Electronics: a bright spot, for now

The outlier is smartphones. Years of subsidy‑backed investment have turned India into a significant assembly base for premium handsets, with Apple and its contract manufacturers sending a rising share of India‑made iPhones to the U.S. Those devices are currently shielded from the new duties, easing pressure on a flagship Make in India success story. But suppliers warn that exemptions can change—and that components still face their own import‑duty thicket inside India, which crimps competitiveness.

The macro picture

India is less export‑dependent than most Asian peers; goods exports account for under a fifth of GDP. That cushions the near‑term macro shock. Still, the U.S. is a pivotal buyer for labour‑intensive industries that absorb millions of jobs. A prolonged tariff standoff could slow private‑capex momentum, weigh on the rupee through lower dollar inflows and complicate the Reserve Bank of India’s inflation fight if import costs rise.

How exporters are responding

CFOs across sectors are dusting off playbooks from earlier trade fights: requesting price pass‑throughs, re‑routing shipments, and exploring limited assembly in the U.S. to qualify for lower duties. Larger groups are evaluating “friend‑shoring” moves to tariff‑lighter countries for the last mile of value addition. Smaller firms have fewer levers; several industry associations are asking New Delhi for emergency interest‑subvention, faster GST refunds and freight support to bridge the next two quarters.

New Delhi’s options

The government has calibrated its response, signalling that talks with Washington will continue even as it challenges the measures at the WTO. Trade officials are mapping a diversification push toward about 50 target markets across West Asia, Africa and Latin America, while accelerating implementation of existing deals with the UAE, Australia and the EU. Any retaliatory duties are likely to be narrowly tailored to avoid inflationary spillovers at home.

What investors are watching

First, duration: are the tariffs a bargaining chip or a new baseline? Second, carve‑outs: how broad are exemptions for critical sectors such as medicines, electronics and renewables? Third, capex commitment: do flagship multinationals stick with India expansions or pause—and does domestic private capex blink? Fourth, the currency path: a softer rupee can cushion exporters but raises imported inflation risk.

The China question

Ironically, the near‑term winner from a U.S.–India tariff war could be China. If American retailers and manufacturers struggle to source competitively from India, some orders may drift back to Chinese plants despite separate U.S. duties on China. That would cut against Washington’s effort to diversify supply chains and New Delhi’s ambition to become the non‑China hub for everything from apparel to electronics.

Bottom line

India’s export engine has proved resilient through pandemics, shipping shocks and energy spikes. But a 50% tariff wall in its biggest market is a structural test of the Make in India model. If the dispute is resolved quickly—or if carve‑outs widen—damage can be contained. If not, policymakers will need to double down on cost competitiveness at home, from logistics to power to import‑duty rationalisation, while exporters re‑wire their customer mix. The promise of India as a supply‑chain alternative to China is not dead—but it suddenly looks harder and more expensive to deliver.

For now, factory owners are doing what they can: running scenarios, calling buyers, and waiting to see whether a summer surprise in Washington becomes a new normal for global trade.