Moody’s Ratings has cautioned that US President Donald Trump’s steep new tariffs on Indian goods could deal a significant blow to New Delhi’s manufacturing ambitions and slow economic growth.
On August 6, Trump signed an executive order imposing an additional 25% “penalty” tariff on Indian imports in response to the country’s continued purchases of Russian crude oil, despite Western sanctions. This new levy, on top of the earlier 25% reciprocal tariff, raises the total tariff rate on Indian exports to the US — India’s largest export market — to 50%, far higher than the 15–20% duties faced by most Asia-Pacific nations.
According to Moody’s, the higher tariffs could trim India’s real GDP growth by around 0.3 percentage points from the current FY2025–26 forecast of 6.3%. Beyond the immediate impact, the ratings agency warned that the sharp tariff gap could “severely curtail” India’s ambitions to grow its manufacturing sector, particularly in high-value segments such as electronics, and might even reverse some recent investment gains.
However, Moody’s noted that India’s resilient domestic demand and robust services sector will help cushion some of the economic strain. Still, it stressed that if India maintains its Russian oil imports despite the tariff penalty, the drag on growth will persist.
The tariff hike comes as part of Trump’s broader trade push, which from August 8 has raised import taxes on goods from more than 60 countries and the EU, with rates ranging from 10% to 20% for other Asia-Pacific economies, and 15% for imports from the EU, Japan, and South Korea. Trump claims the tariffs will drive unprecedented US growth and manufacturing investment, though economists warn of emerging signs of strain in the American economy.
