India has approved tax cuts to counter the new US tariffs imposed last month, escalating the trade crisis between the two nations. The US tariffs, which were increased to 50% on Indian imports effective August 27, 2025, have affected key sectors such as garments, gems and jewelry, footwear, sporting goods, furniture, and chemicals.

Background

The US imposed an additional 25% tariff on Indian goods, citing India’s continued purchase of Russian oil. This move has impacted around 55% of India’s approximately $87 billion annual exports to the US. The Indian government has taken steps to mitigate the impact of these tariffs on its economy.

Key Features of the US Tariffs

– *Tariff Rate*: 

50% on Indian imports, comprising a 25% “reciprocal” tariff and an additional 25% levy tied to India’s oil purchases from Russia.

– *Affected Sectors*: 

Garments, gems and jewelry, footwear, sporting goods, furniture, and chemicals.

– *Export Impact*: 

Around 55% of India’s $87 billion annual exports to the US are affected.

India’s Response

The Indian government has approved tax cuts to counter the new US tariffs. The tax cuts aim to reduce the economic burden on Indian businesses and help them remain competitive in the US market.

Implications

The trade crisis between India and the US has significant implications for both countries. India is working to cushion the blow of the tariffs, while the US is pushing for a change in India’s stance on Russian oil purchases. The situation remains fluid, with potential for further escalation or negotiations to resolve the trade dispute.