Will US tariffs make Indian export goods cheaper at home?

August 28, 2025 Hot from the Oven Valli Sarvani

Starting yesterday, August 27, 2025, the 50% US tariffs on Indian goods came into effect.

Affected sectors include textiles, gems, jewellery, carpets, furniture, and shrimps.

At first glance, it might seem that these goods, now harder to export profitably, will flood the Indian market and become cheaper for local consumers. But reality is more complex.

Export goods often differ in quality. Many items bound for the US are made to meet specific standards, often much higher than what is expected domestically.

These goods also sell in dollars, making exports lucrative despite thin margins. In India, consumer purchasing power is lower, and demand may not match the scale needed to absorb all surplus goods.

Exporters typically rely on high-volume, low-margin business models that may not translate well in the local market.

Large exporters may hold inventory, seek new markets like the EU or the Gulf, and wait out the uncertainty.

But small traders, under pressure to clear stock quickly or repay loans, might sell in India, even at reduced margins.

That could mean some lower prices for select goods, especially textiles and leather, but not uniformly.

Export slowdown could hit manufacturing jobs hard. India’s export advantage comes from cheap labour, not automation.

If fewer goods are produced, many low-skilled workers may lose jobs. Over time, this could reduce domestic spending power, putting further pressure on demand.

Trade bodies are urging the government to provide emergency loans and support. But with US trade policy under President Trump, known for sudden shifts, planning long-term solutions is risky.

Due to ongoing uncertainty, exporters may delay investing in alternative markets until the situation becomes more stable.

While some export goods may see minor domestic price dips, most are unlikely to become significantly cheaper. The real risks lie in job losses and economic stress in key export-driven industries.

Image from Pxhere (Free for commercial use / CC0 Public Domain)

Image Published on December 27, 2016