US President Donald Trump’s latest move, which will double the tariff on Indian goods from 27 August, targets $6.2 billion in garment exports, $1.3 billion in leather goods, and billions more in chemicals, pharma, shrimp and petroleum. While the textile and leather sectors face an immediate competitiveness shock, the Narendra Modi government is using the crisis to accelerate ease-of-doing-business reforms: a single-window clearance system modelled on passport services, side-letter deals with trusted partners, and streamlined land and contract processes.
The officials say these measures will fortify India’s manufacturing and export base and protect jobs, regardless of whether a US trade pact materialises, as the global trade order is becoming more unpredictable by the day.
The new tariff regime, announced by Trump imposes a 25% penalty tariff on goods from India over and above the 25% duty that came into effect 7 August.
Without going in for counter measures, the government is focusing on making India more self-reliant, boosting domestic manufacturing, and attracting higher investment from trusted global partners, the officials directly involved said.
The emerging plan includes a series of structural steps aimed at increasing India’s resilience against external shocks. “This includes finalising side-letter arrangements with friendly trading partners for assured long-term procurement, streamlining clearances for exporters through a faceless, passport office-style system, and removing procedural hurdles that raise transaction costs,” said the first of the two officials mentioned above.
However, this person clarified that these structural reforms will continue even if a trade agreement with the US is eventually concluded.
The government sees this as an opportunity to address long-standing procedural bottlenecks that often compel investors to rely on middlemen for basic services such as unit registration, identification of industrial land, and conversion of agricultural land for commercial use, among others. “The prime objective is to keep the manufacturing sector on track and protect employment.”
“These fundamental requirements will now be streamlined under a new centralised system,” said the second official.
India got foreign direct investment (FDI) worth $81.04 billion in FY25, marking a 14% rise from the previous year and maintaining its position as one of the world’s leading investment destinations.
Commerce ministry data showed that the services sector emerged as the top recipient of FDI equity inflows, accounting for 19% of the total, with investments rising nearly 41% to $9.35 billion in FY25 from $6.64 billion a year earlier. The government has set an FDI target of $100 billion for FY26.
India ranked 63rd out of 190 countries in the World Bank’s Doing Business 2020 report, the last edition published before the index was discontinued in 2021 due to data irregularities. This ranking marked a significant improvement from the 142nd position in 2014.
“A single interface—both physical and digital—is being planned, through which most of the approvals will be processed online,” said the second person.
“A time slot will be allocated to investors and manufacturers upon request, allowing for in-person visits only where necessary. The model draws inspiration from the faceless passport service system and may leverage existing infrastructure such as common service centres in rural areas,” the second official said, adding that the objective is to address key challenges such as enforcing contracts and registering property, as these often involve bureaucratic delays and a reliance on intermediaries.
Analysts have pointed to a deeper concern that the global trade order is becoming increasingly unstable. “The entire trade dynamic has been distorted. It’s becoming completely trustless. No rulebook is being followed, particularly not the WTO (World Trade Organization) framework, which was originally shaped by the US itself,” said Dattesh Parulekar, assistant professor of International Relations at Goa University.
“Tariffs were earlier seen as instruments within a rules-based system, they are now being deployed as tools of pressure, in contravention of the very trade norms that the multilateral order was built upon,” Parulekar added.
“The loss due to high tariffs is imminent unless the issue is resolved. Shifting the manufacturing base to a low-tariff country is also not a practical option—who knows, after a few days or months, that country may also face similar tariffs, as the entire trade dynamic has changed. Every country now wants to expand its manufacturing base and earn through exports,” a senior executive from the textile industry said.
Sectors hits by tariffs
The US cited India’s oil trade with Russia as the reason for the stinging tariffs, even though such trade is not restricted under US or UN rules. With this, India becomes one of the most heavily taxed trading partners of the US, much worse off than China (30%) or Vietnam (20%), and on par with Brazil.
The textile and apparel sector, which exports about $6.2 billion worth of garments to the US annually, will be among the hardest hit. Most products in this category previously faced zero or low tariffs, but will now attract the full 50%, severely denting price competitiveness and potentially leading to order cancellations in the coming weeks.
Leather goods and footwear, another labour-intensive segment, is also expected to lose ground. These exports, valued at around $1.3 billion to the US, may become unviable as buyers turn to Southeast Asian suppliers, especially Vietnam and Indonesia.
Organic chemicals and pharmaceuticals are also vulnerable. India exports about $2.7 billion worth of organic chemicals and $7.2 billion worth of pharmaceutical products to the U.S. The new tariffs could impact formulations and intermediates unless exemptions are granted for essential medicines or ongoing supply contracts.
Shrimp exports, currently valued at $2 billion, will now face a sharp rise in duties. Despite being duty-free earlier under GSP and MFN rates, they will now attract the full 50%, making Indian seafood considerably more expensive than that from Latin American or ASEAN competitors.
Even petroleum products, which contributed $4.1 billion in FY25 exports to the US, are under pressure. While already facing a 6.9% most-favoured nation duty, the new measures could restrict volumes as refiners lose pricing advantage.
(Except for the headline, this story has not been edited by PostX News and is published from a syndicated feed.)
