Trump’s 50 % Tariff Hits India — Modi Calls for Self Reliance

The U.S. has implemented a steep 50 % tariff on Indian goods, following an executive order that slapped an additional 25 % charge on New Delhi’s purchases of Russian oil and defense equipment. This move places India among the countries facing the highest tariffs globally, jeopardizing its export-driven sectors and slowing growth in the world’s fifth-largest economy.

Prime Minister Narendra Modi has responded swiftly, promising tax relief ahead of Diwali and calling for a surge in domestic self-reliance—embodied by the slogan "Make in India, Spend in India." In a vibrant Independence Day address from Delhi’s Red Fort, he urged shopkeepers to proudly display "Swadeshi" (Made in India) signage:

“We should become self-reliant—not out of desperation, but out of pride.”

— Narendra Modi

Despite efforts to boost manufacturing—currently stagnant at around 15 % of GDP—even generous subsidies have failed to reinvigorate the sector. The tariff shock, however, could reignite momentum.

Modi’s financial stimulus centers on simplifying India’s complex Goods & Services Tax (GST): the finance ministry has proposed a streamlined two-tier system. When combined with the $12 billion income tax giveaway implemented this spring, analysts from Jefferies estimate the measures could inject a meaningful consumption boost equivalent to US$20 billion.

Why it matters for startups and SMEs:

Consumption power—which accounts for nearly 60 % of India’s GDP—is expected to rebound, especially among urban consumers facing economic headwinds from the pandemic.

Pro-consumer sectors—like scooters, apparel, small cars, and construction materials—may see early gains thanks to lower upfront costs and festive demand.

A GST cut could deliver a stronger multiplier effect than earlier corporate tax reforms, by encouraging spending at the point of sale.

India’s central bank may respond with further rate cuts, given the stimulus environment and recent rate easing.

A sovereign rating upgrade from S&P Global—the first in 18 years—improves borrowing terms and should attract additional foreign capital.

Still, India’s growth is running below its 8 % potential, and trade friction with the U.S.—especially tied to its Russian energy dealings—continues to escalate. A recently scheduled trade discussion was abruptly canceled, underscoring the 50 % tariff’s resemblance to economic sanctions between two strategic powerhouses.

Key Takeaways for the Startup Ecosystem