How Will Donald Trump's 50% Tariff Impact India's Economy and IT Sector? Know Here

Mumbai, August 6: US President Donald Trump’s move to impose a total of 50% tariffs on Indian imports, by adding an additional 25% duty over previous rates, has triggered concern across various sectors, especially India’s export-driven IT industry. The decision, justified by India’s continued purchase of Russian oil, signals growing tensions in Indo-US trade relations. With Indian software and tech firms heavily dependent on the US market, the question arises: Could this political move disrupt India’s booming IT sector? Donald Trump Signs Executive Order Imposing Additional 25% Tariffs on Indian Imports for Buying Russian Oil.

While the executive order targets goods, the indirect ripple effect on services and outsourcing may be significant. Though IT services are not directly taxed, the tariffs could lead to stricter immigration policies, procurement scrutiny, and increased regulatory pressure on Indian firms operating in the US. As the world's largest software services exporter, India may find its tech giants, like Infosys, TCS, and Wipro, caught in the crossfire of shifting foreign policy dynamics. Let’s know how Trump’s 50% tariff decision could impact India’s booming economy, especially the IT sector. Donald Trump Slaps Additional 25% Tariff on Indian Imports, Claims India’s Imports of Russian Oil Pose an ‘Unusual and Extraordinary Threat’ to US.

Immediate Economic Impact

• Exports at Risk:

  Nearly half of India’s $85 billion in exports to the US—spanning textiles, electronics, engineering, chemicals, and more—are now under threat. For engineering exports alone, Indian industry groups estimate a loss of $4–5 billion under these tariffs. Although the IT industry’s core exports (services, software) are not directly subject to these tariffs, the broader technology and electronics sectors that ship physical goods will be hit hard.

• Electronics Manufacturing:

  Higher tariffs on electronics components and finished goods will hurt India’s ambitions to become a global manufacturing hub, especially as the country was positioning itself as an alternative to China in supply chains. Exporters in electronics will face higher costs, reduced competitiveness, and a tougher time moving up the value chain.

• Ripple Effects on IT Services:

  While Indian IT and software exports are not immediately targeted, industry leaders and analysts warn of significant indirect effects.

• Cutbacks in US Tech Spending:

  American companies, facing higher costs due to tariffs, may reduce discretionary tech spending and delay outsourcing or digital transformation projects. This can reduce demand for Indian IT services in their largest export market.

• Investor Sentiment:

  The Nifty IT index and shares of major Indian IT companies like TCS, Infosys, Wipro, and Mphasis have already fallen sharply amid tariff fears. Firms heavily dependent on US revenues—many with more than 70% of sales from America—face heightened uncertainty.

• Workforce Mobility and Regulation:

  Escalating trade tensions may prompt regulatory changes affecting Indian tech talent deployed onsite in the US. New digital taxation debates could further complicate cross-border contracts and project delivery.

The executive order also empowers key U.S. departments to monitor oil trade by other nations and recommend similar punitive actions, raising concerns of broader trade scrutiny. Indian exports now face tighter customs regulations, including foreign trade zone restrictions, unless exempted. Trump also retains the authority to alter the tariffs based on diplomatic or policy shifts.

(The above story first appeared on LatestLY on Aug 06, 2025 09:06 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).