đź“°Should you still be bullish on India?

After a 50 percent tariff from the U.S., can India still fulfill its growth expectations?

August 08, 2025

Today, we analyze what’s next for India after the White House seems ready to put a 50 percent tariff on Indian imports, an effective trade embargo for many industries that will be priced out of the American market.

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The Tariff War with India: How to Lose Friends and Strengthen Rivals

The U.S.–India relationship, long touted as the lynchpin of Washington’s “Pivot to Asia,” has entered its most strained period in decades. Over the past month, the White House has rolled out sweeping tariffs on Indian imports, framed as a response to New Delhi’s continued purchases of discounted Russian crude. The president has put a higher tariff on India than on any other country, except Brazil, at a total of 50 percent.

First things first: when the White House says they’ve slapped a tariff on a country, the country in question is the U.S. Every single time. In this case, the 50 percent tariff is on American businesses buying Indian imports. Yes, this still hurts India, because there will be lower demand for its goods.

As of now, a 25 percent tariff is in place (just slightly lower than the 26 percent tariff proposed on “Liberation Day,” equal to 0.5 times trade deficit divided by imports. Layered on top is an additional 25 percent “Russian oil penalty,” set to kick in over the next few weeks, a measure designed to punish India for energy purchases from Moscow. However, China buys tens of billions more in Russian oil, yet faces a lower overall tariff rate than India and no special penalty for those purchases. The difference? The U.S. has far less leverage over China. But it does have leverage over India, thanks to decades of close economic and security ties that make India a key ally and counterweight to China in global supply chains. That’s the irony: allies get punished because they’re allies; adversaries skate by.

The friendshoring paradox: This dynamic is particularly striking given that “friendshoring”, the deliberate redirection of supply chains away from strategic rivals toward trusted partners, has been an explicit pillar of U.S. policy since the Obama administration. It’s not just rhetoric; corporate America has followed through. Apple, seeking to reduce its dependence on China, has shifted enough production to make India the world’s largest smartphone exporter by value. Several major electronics manufacturers, from Dell to Samsung, have followed suit, encouraged by production-linked incentives from New Delhi and bipartisan political support in Washington.

Smartphone manufacturing in India

For India, this was a rare alignment of national interest and global supply chain trends. Historically, the country has avoided deep economic dependence on any single major power, practicing “strategic neutrality” through the Cold War and beyond. That posture softened during the Trump and Biden years, as New Delhi recognized that deeper ties with the U.S. could be mutually beneficial, both in counterbalancing China and in opening the U.S. market for Indian goods and services. But the tariffs have effectively closed that door, jolting India back to its older instinct: diversify relationships, never rely too heavily on one partner, and maintain maximum strategic flexibility. In the process, the U.S. has undercut its best potential counterweight to China in global manufacturing and trade.

Pharma: The penalties do not stop with smartphones or industrial goods. India’s pharmaceutical industry, often called the “world’s pharmacy,” supplies 20 percent of all drugs prescribed globally and nearly half of all generics sold in the U.S. and U.K. A proposed 250 percent tariff on Indian pharmaceutical imports would be the functional equivalent of a trade embargo, a tool historically reserved for adversarial states like Russia, Iran, or North Korea.

The effects would be severe on both ends. For the U.S., drug prices would spike, particularly for lower-cost generics used to treat chronic conditions. For India, its $27 billion (â‚ą2.4 trillion) pharma export sector would lose its most lucrative high-margin market. This is not just an economic blow; it would also upend a supply chain relationship that has, until now, been treated as strategically important for public health in both countries.

Understanding What’s Next for India

Not a “poor country.” To understand India’s economic role, it’s important to start by clarifying that it is not a country that should be written off as “poor,” as it often is. While per-capita income remains modest, India is the world’s largest middle-income nation, home to 432 million middle-class consumers. Annual consumer spending, in purchasing power parity terms, is $9 trillion (₹787.9 trillion), trailing China’s $12 trillion (₹1.05 quadrillion) but closing fast, thanks to lower savings rates and faster GDP growth.

For U.S. corporations, this is a market opportunity on the scale of China in the early 2000s. China has served as an enormous and lucrative market for U.S. corporations, especially for China and Tesla. Still, the nation accounts for just 7 percent of S&P 500 companies’ revenues. India’s market, still relatively untapped, has the potential to rival that contribution, especially given its demographic trends and appetite for foreign brands. Tariffs risk locking U.S. firms out just as India approaches its consumption inflection point.

Why the U.S. still needs India’s labor advantage: Yes, India faces structural economic challenges, particularly underemployment and youth joblessness. But these are exactly the conditions that make the country eager to deepen trade ties with large consumer markets. Over the past few months, India has inked a free trade agreement with the United Kingdom, accelerated negotiations with the European Union, and even began warming ties with China after a bruising border standoff in 2020.

India has more leverage in negotiations than people realize. Fifty-two percent of the population is under 30, representing the largest potential workforce in the world. The country has invested heavily in infrastructure, rolled out a state-of-the-art digital payments system, expanded mobile internet access to nearly every village, and integrated 1.4 billion people into a single free trade economic zone and regulatory market. The language of business in India is already English, and it is widely taught in elementary school. Manufacturing ambitions are backed by a suite of incentives and policy reforms aimed at positioning India as the “next China” for global supply chains.

From a U.S. perspective, this is not a market to alienate. Seventy percent of American workers are employed in services, and Bureau of Labor Statistics data show little appetite for a return to large-scale manufacturing. Offshoring production is an economic constant, not a temporary phenomenon. The question is whether those goods will come cheaply from allies or at a premium from less aligned suppliers.

Is India still the growth story it was promised to be? Samosa Capital is still bullish on the India story. The White House's tariff policy is expected to shave 1 percent of India's GDP, but that is a short-term setback. We’re talking about a country with 728 million people under the age of 30, with access to education, a state-of-the-art digital banking system (UPI), widespread internet access, living under one unified economic zone, with 50+ trade agreements worldwide, and a single national government. 728 million young people aren't waiting for others to let them succeed. The human spirit always prevails, and history says this formula wins every time.

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Written by Eshaan Chanda & Yash Tibrewal. Edited by Shreyas Sinha.

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Disclaimer: This is not financial advice or recommendation for any investment. The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.