U.S. President Donald Trump’s decision to double tariffs on Indian goods—raising duties to as high as 50%—has taken effect, straining relations between two strategic partners and threatening growth in the world’s fastest-growing major economy.

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The new 25% levy, imposed in response to India’s purchase of Russian oil, stacks on top of an earlier 25% tariff and now covers key products including garments, gems and jewelry, footwear, sporting goods, furniture, and chemicals. Exporter groups warn the duties could affect more than half of India’s $87 billion in merchandise exports to the U.S., putting small businesses and as many as 2 million jobs at risk.

New Delhi is exploring measures to cushion the blow. Officials are in talks with exporters about redirecting shipments to markets such as the U.K., Australia, the UAE, and Europe, while also considering financial support, including low-cost credit and possible loan moratoriums. Analysts say a weaker rupee could help restore some export competitiveness, but they urge broader economic reforms and a less protectionist trade stance to offset the impact.

Washington argues India’s Russian oil imports help fund Moscow’s war in Ukraine, a claim India dismisses as hypocritical given U.S. and European trade links with Russia. “Our concern is energy security,” junior foreign minister Kirti Vardhan Singh said. “We will continue to purchase energy sources from whichever country benefits us.”

The tariff hike follows five rounds of failed negotiations, with U.S. officials refusing to cap duties at 15%—a rate applied to other major trading partners. Both sides blame political misjudgment for the breakdown. Their bilateral goods trade totaled $129 billion in 2024, with a $45.8 billion U.S. trade deficit.

Market reaction has been sharp. Indian equity benchmarks suffered their worst session in three months, and the rupee fell to its lowest level in three weeks. Analysts warn that prolonged tariffs could undermine India’s appeal as an alternative manufacturing hub to China, even as its diversified export base and solid domestic demand offer some buffer.

Despite rising tensions, India has signaled it remains committed to the U.S. partnership, especially as both nations share strategic concerns about China.