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Trump's 50 per cent tariff: Indian exporters are bracing for a sharp decline in US orders after trade talks were halted and Washington confirmed that steep new tariffs on the South Asian nation's goods taken effect from Wednesday, escalating tension between the strategic partners. An additional 25 per cent duty announced by President Donald Trump, confirmed in a notice by the US Department of Homeland Security, takes total tariffs to as much as 50 per cent, among Washington's highest, in retaliation for New Delhi buying of Russian oil.

1. US tariffs likely to affect US GDP by 40-50 bps: SBI report

The recent move by the United States to impose steep tariffs on Indian goods is expected to weigh on the US economy, pushing up inflationary pressures and impacting growth, according to a report by the State Bank of India (SBI).

The report said that US GDP could be affected by 40-50 basis points due to the new tariffs, while the economy is also likely to face higher input cost inflation.

The US is India's largest export destination for textiles, a sector where India has steadily gained market share over the past five years, even as China's share has declined. This underscores India's growing role in the US supply chain. Similarly, the US remains the biggest market for India's gems and jewellery sector, accounting for nearly one-third of its USD 28.5 billion annual shipments.

"The government has no hope for any immediate relief or delay in US tariffs," news agency Reuters quoted an Indian commerce ministry official. Exporters hit by tariffs would receive financial assistance and be encouraged to diversify to markets such as China, Latin America, and the Middle East, the official added.

2. When will US 50 per cent tariff come into effect

The new duties came into effect from 12:01 a.m. EDT on Wednesday (9:31 a.m. IST), it showed. Exceptions are shipments in transit, humanitarian aid, and items under reciprocal trade programmes. The Indian rupee fell to a three-week closing low of 87.68 against the dollar.

Indian officials had signalled optimism that tariffs could be capped at 15 per cent. Officials on both sides blamed political misjudgment and missed signals for the breakdown in talks between the world's biggest and fifth-largest economies, whose two-way trade is worth more than $190 billion.

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White House trade adviser Peter Navarro and US Treasury Secretary Scott Bessent has accused India of indirectly funding Russia's war against Ukraine by boosting Russian oil purchases. This month, Bessent said India was profiteering from its sharply increased imports, making up 42% of total oil purchases, versus less than 1 per cent before the war, a shift Washington has called unacceptable.

3. India's Labour intensive sectors brace for 70% export collapse

The exports of the labour intensive sectors in the country brace for a collapse of up to 70 per cent as US tariffs set to take effect, according to a report by the Global Trade Research Initiative (GTRI). As per the GTRI report it will impact a large portion of India's export basket, particularly in sectors generating massive employment. The report said "Labour-Intensive Sectors Brace for 70 per cent Export Collapse". The report noted that U.S. tariffs will hit 66 per cent of India's total exports worth USD 86.5 billion, amounting to USD 60.2 billion in goods, which will face duties of 50 per cent or higher.

4. Exporters seek aid

Exporter groups estimate hikes could affect nearly 55 per cent of India's merchandise exports are worth $87 billion to the US, while benefiting competitors such as Bangladesh, China and Vietnam. "The US customers have already stopped new orders," said Pankaj Chadha, president of the Engineering Exports Promotion Council. "With these additional tariffs, the exports could come down by 20 per cent to 30 per cent from September onward."

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The government has promised financial aid such as greater subsidies on bank loans and support for diversification in the event of financial losses, Chadha added. "However, exporters see limited scope for diversifying to other markets or selling in the domestic market."

The commerce ministry official said India had identified nearly 50 countries to which it could boost exports, particularly items such as textiles, food-processed items, leather goods and marine products.

India's diamond industry exports have already hit a two-decade low on weak Chinese demand, and the higher tariffs now threaten to cut it off from its largest market, taking nearly a third of $28.5-billion annual shipments of gems and jewellery.

5. Broader economic impact of Trump’s tariff on India

Private sector analysts warned that a sustained 50 per cent tariff could weigh on India's economy and corporate profits, prompting the steepest earnings downgrades in Asia, even if proposed domestic tax cuts partly cushion the blow.

Last week, Capital Economics said full US tariffs would chip 0.8 percentage points from India's economic growth both this year and the next. External Affairs Minister S Jaishankar also said trade talks continued and Washington's concern over Russian oil purchases was not equally applied to other major buyers such as China and the European Union.

The US could be a major energy supplier to India and is committed to collaborate on exports of products and services to help India achieve energy security and economic growth, an official of its embassy said on Tuesday.

Prime Minister Narendra Modi has vowed not to compromise the interests of Indian farmers, even if it entails a heavy price. PM Modi is also moving to burnish ties with China, planning his first visit there in seven years at the end of the month.

(With inputs from Reuters and ANI)