Donald Trump’s 50% Tariffs on India Spark Economic Concerns, Modi Promises Tax Relief
New Delhi: The United States has officially imposed steep 50% tariffs on Indian exports, just weeks after President Donald Trump signed an executive order adding an extra 25% penalty over India’s purchases of Russian oil and defense equipment.
With these new trade barriers, India—one of Washington’s key partners in the Indo-Pacific—now faces some of the highest tariffs in the world. Analysts warn this move could hit exports, jobs, and growth in the world’s fifth-largest economy. Until recently, the U.S. was India’s largest trading partner, making the impact even more significant.
India’s Response: Modi Pushes Self-Reliance and Tax Cuts
The Indian government has shifted into crisis-management mode. Prime Minister Narendra Modi, addressing the nation from Delhi’s iconic Red Fort during Independence Day celebrations, promised a “Diwali gift” in the form of major tax relief for citizens and small businesses.
Wearing a saffron turban, Modi urged millions of shopkeepers and entrepreneurs to display “Swadeshi” (Made in India) signs outside their stores.
“We must become self-reliant—not out of desperation, but out of pride,” he declared. “As economic nationalism rises globally, India must rise above challenges and refuse to be held hostage by others.”
He has repeated this call for domestic manufacturing and spending in multiple speeches this week, framing it as the nation’s best defense against Trump’s aggressive tariff policy.
Tariffs Threaten Export-Driven Industries
The 50% tariff hike is expected to hit Indian industries that rely heavily on U.S. consumers, including textiles, jewelry, shrimp, and diamond exports. Economists caution that millions of livelihoods could be disrupted if trade flows weaken further.
While Modi has promoted the “Make in India” initiative for years, India’s manufacturing share in GDP remains stuck around 15%, despite subsidies and production-linked incentives.
Tax Reforms on the Horizon
To cushion the blow, Modi is doubling down on tax reforms. After unveiling a $12 billion income tax relief package in this year’s budget, his government is now preparing a simplification of the Goods and Services Tax (GST) system.
Experts believe such reforms could inject more disposable income into households, helping boost domestic demand and soften the immediate shock of U.S. tariffs.
The Bigger Picture
India finds itself at a crossroads: balancing a global trade setback while rallying its citizens toward economic self-reliance and resilience. With U.S.-India trade ties under strain, Modi’s strategy of pairing tax relief with a push for “Made in India” could prove crucial in stabilizing Asia’s third-largest economy.