New Delhi, August 1, 2025 – Deepening trade tensions and market volatility have created alarm in India in response to President Donald Trump’s announcement of a 25% tariff on India exports entering the US effective August 7th as well as unspecified penalties aimed at India’s defense and energy ties with Russia (Reuters +1).
India’s financial markets reacted swiftly. The rupee fell to near record lows of Rs87.74-87.95 per dollar while both the Sensex and Nifty 50 indexes shed 0.6% before eventually closing with moderate losses on August 1, according to Reuters reports.
Analysts from multiple firms warned that tariffs could potentially reduce economic growth by 30-to-40 basis points over fiscal 2025-2026, according to www.ndtv.com and Reuters, respectively.
Experts Have Spotted an Impact to Exporters
Trade experts noted the risk of trade disruption on key labor-intensive sectors like gems, textiles, apparel, footwear marine products and machinery exporters. The Gems & Jewellery Export Promotion Council issued a warning that almost 30% of its revenue comes from U.S. shipments causing job losses and competitiveness erosion for their members, reports Reuters.
MSME leaders in Punjab’s industrial city of Ludhiana estimated a potential risk of Rs1 lakh crore due to cancelled orders for fasteners, auto parts and machine tools – reported The Times of India.
Political and Official Reactions
Government leaders have responded with caution. Commerce Minister Piyush Goyal stated the administration is currently “studying implications,” assuring all necessary steps will be taken to protect national interest (NDTV.com/+1 or The Indian Express).
Meanwhile, Congress and AAP criticised the government’s close ties to Trump, warning of potential diplomatic missteps, with some labelling Trump’s remarks “threatening”. Critics also mocked India’s foreign policy for being undermined, according to The Indian Express and The Washington Post (both plus two). And finally NDTV reported on this debate too
Expert Views: Short-Term Pain Versus Long-Term Strategy
While acknowledging economic disruption, Indian trade experts remain cautiously optimistic. PwC India and EY India economists suggested that due to ongoing bilateral trade agreement negotiations, tariff pressure may only last briefly before negotiations reach completion in Q3 2025 resulting in softening tariff pressure (Reuters +1).
Economic advisors noted India had assumed a tariff differential — usually 10-20 percentage points lower than China’s 30% rate — and Trump would honor India’s agricultural and MSME “red lines.” Both assumptions are now uncertain The Indian Express
The Times of India [T.O].
Domestic Industry & Investor Sentiment
Financial analysts at Kotak Mahindra, ICRA, Institutional Equities and other firms highlighted vulnerable sectors linked to U.S. demand as they predicted some export slowdown but emphasized fundamental strength if uncertainty were to quickly dissipate; mitigating fiscal measures, further RBI intervention or rate cuts might help cushion any blow from uncertainty (Reuters).
Capital outflows accelerated: foreign portfolio investors withdrew more than $600 million from Indian equities, leading to sustained selling pressure that saw rupee decline. Strategic Outlook for Trade Diversification & Diplomacy.
Indian industrialists recognize an opportunity in crisis. Harsh Goenka advocated shifting their focus towards European and ASEAN markets to reduce dependence on U.S. markets.
Government sources reiterated India’s desire for a trade deal that provides for fairness and mutual benefit between both sides, not an easy capitulation under pressure. Negotiations is ongoing and officials say India would rather bear short-term pain rather than accept an unacceptable agreement that harms farmers and MSMEs, according to The Indian Express and Politico +1 +1
India’s anxiety over new U.S. tariffs of 25% is evident across political, economic and business circles. Exporters anticipate a possible 30% drop in goods shipments while financial markets become restive; authorities reiterate their stance that India will never compromise its core interests in trade talks; yet optimism persists that an eventual bilateral deal might ultimately eliminate tariff risks altogether.
