Small and medium-sized enterprises (SMEs) across India are scrambling to protect US contracts as punitive 50% tariffs on Indian goods take effect today (27 August 2025), threatening a trade relationship worth nearly US$87bn a year.

This escalation from the previous 25% rate makes India subject to the highest levy of any US trading partner.

Triggered by Washington’s opposition to India’s continued imports of discounted Russian oil, the tariffs will affect an estimated US$48.2bn in Indian exports, with micro, small and medium-sized enterprises (MSMEs) – which are responsible for around 45% of India’s exports – hit the hardest across labour-intensive sectors such as textiles, gems, jewellery and auto parts.

“US customers have already stopped new orders,” Pankaj Chadha, president of the Engineering Exports Promotion Council, told Reuters. “With these additional tariffs, the exports could come down by 20% to 30% from September onward.”

In the weeks leading up to the tariffs kicking in, the Federation of Indian Export Organisations (FIEO) had called the move “a shocker for Indian exporters” and warned that nearly 55% of shipments to the US are directly affected. Director general Ajay Sahai told the ANI news agency that the new duties place Indian exporters at a 30–35% competitive disadvantage.

According to the Economic Times, the government is preparing a 20,000 crore rupee (about US$2.3bn) Export Promotion Mission to cushion small businesses. Measures under discussion include lowering interest rates on export credit to cut financing costs, waiving processing fees and offering targeted liquidity support.

As reported by Reuters, officials are also pushing to re-route exports toward alternative markets in Asia, Latin America and the Middle East to reduce reliance on the US.

Indian Prime Minister Narendra Modi has convened an emergency meeting to discuss relief measures, promising that the government “will find a way out.” Exporters urge policymakers to act quickly to prevent widespread closures and preserve India’s hard-won position in global supply chains.