Last Updated:August 28, 2025, 16:17 IST
India may be the target of Washington’s steep tariffs, but it’s the US economy that could face the long-term cost of its own economic squeeze
The United States’ 50 per cent tariff on Indian goods officially came into effect on Wednesday.
The United States’ 50 per cent tariff on Indian goods officially came into effect on Wednesday. This includes a second 25 per cent duty, building on an earlier 25 per cent hike notified earlier this month. The US Department of Homeland Security has confirmed that the higher rate will apply to any Indian goods “entered for consumption or withdrawn from warehouse for consumption” on or after this time.
The move is part of President Donald Trump’s broader tariff agenda, with India among several countries targeted over ongoing economic ties with Russia, particularly its continued purchase of discounted Russian crude. But while the aim may have been to punish India economically, multiple indicators suggest that American consumers, businesses, and universities may suffer significant collateral damage.
How The Tariffs Will Hit US Consumers
The most immediate fallout of the 50 per cent duty is likely to be rising prices across a wide range of everyday goods. Indian exports to the US include auto parts, IT hardware, textiles, and industrial chemicals, all of which are used extensively in American manufacturing and retail.
Higher tariffs mean that these goods will become more expensive to import, and businesses will likely pass on the cost to consumers. With inflation already running high, the added burden from steeper import duties will make it harder for the Federal Reserve to ease pressure without risking a fresh price spiral.
Healthcare Costs Could Rise, Even If Pharma Is Exempt
India is a global pharmaceutical powerhouse, supplying nearly 40 per cent of all generic drugs used in the United States. Although the sector has been exempted from the 50 per cent duty, the threat of future inclusion, or regulatory pressure on US pharma firms to shift supply chains, looms large.
If the exemption is lifted or narrowed, the resulting price hikes would not just impact consumer drug prices but could also strain insurance payouts, Medicare spending, and hospital procurement. Even the fear of tariff risk is already affecting procurement strategies, leading to costlier and slower access to critical medications.
India’s Role In US Supply Chains: Disruption Is Likely
India is not just a source of finished goods but also a crucial supplier of intermediate goods, including APIs (active pharmaceutical ingredients), specialty chemicals, and software services. US companies rely heavily on Indian partners for manufacturing inputs, IT-enabled services, and backend support.
The new tariffs introduce major uncertainty into these supply chains. Delays, rising costs, and sourcing complications are expected to create logistical bottlenecks, particularly in sectors like chemicals, electronics, and life sciences. In many cases, Indian firms may no longer be competitive under the 50 per cent duty regime, forcing US companies to look elsewhere, often at higher cost.
The H-1B Clampdown
Alongside tariffs, Washington has also signalled a tightening of H-1B work visas, which disproportionately affect Indian tech professionals. Between October 2022 and September 2023, Indian nationals received over 72 per cent of all H-1B visas issued.
US tech giants like Google, Microsoft, and Amazon rely heavily on this talent stream for roles in engineering, data science, AI, and cybersecurity. Stricter visa norms mean higher labour costs, longer hiring cycles, and lost productivity, especially for startups and mid-tier firms that cannot afford to outbid competitors for domestic talent.
Innovation, Productivity, And GDP Growth May Suffer
The cost of restricting Indian tech talent goes beyond HR bottlenecks. Indian-origin professionals drive innovation across multiple sectors, from AI and fintech to pharmaceuticals and climate tech.
H-1B visa holders contribute over $80 billion annually in federal, state, Social Security, and Medicare taxes. They spend more than $76.7 billion in the local economy and invest around $12 billion every year. For every H-1B job filled, studies suggest up to 7.5 additional jobs are supported.
Even a 1 per cent rise in H-1B participation correlates to a 0.5 per cent boost in US GDP, according to the National Bureau of Economic Research. By choking off this pipeline, the US risks not just a talent shortage but a long-term dip in innovation and productivity.
US Universities Face Billions In Losses From Stricter OPT Rules
Another pressure point is the expected fallout from stricter Optional Practical Training (OPT) rules for international students. Indian students are the second-largest foreign student cohort in the US, with over 331,000 enrolled in 2025 alone.
They contribute close to $8 billion annually through tuition and local spending, much of which supports university budgets, student housing, and service economies in college towns. Most Indian students pursue STEM degrees, and many transition to H-1B roles post-graduation.
Tighter OPT norms risk not just reducing enrolment but also weakening the US innovation pipeline and damaging the financial health of universities dependent on full-tuition international students.
Global Talent Competition Could Leave US Behind
While the US tightens visa and work regulations, Canada, the UK, and Australia have made aggressive moves to attract Indian talent through simplified work permits, residency pathways, and startup incentives.
If Washington continues to restrict post-study work and skilled migration, it could face a brain drain reversal, where the brightest Indian students and workers choose more welcoming destinations, eroding America’s long-standing tech and research advantage.
Retaliation Risk: US Exporters, Farmers Could Face The Heat
India has so far not imposed counter-tariffs but has signalled that retaliatory action may be on the table. Possible targets include US agricultural exports, alcoholic beverages, and aircraft parts, key industries with heavy export exposure. If New Delhi responds in kind, US farmers and exporters, especially in politically sensitive Midwestern states, could face order cancellations and price competition from rival suppliers.
Impact On Workforce Diversity And STEM Pipeline
Foreign students, particularly from India, fill a critical gap in the STEM workforce. Over 50 per cent of international students study STEM fields, and among Indian students, this number is over 70 per cent. Many go on to work in American labs, companies, and hospitals.
Restricting this inflow widens the skills gap, particularly in high-demand fields like data science, healthcare, and energy. It also threatens America’s ability to maintain a diverse, globally competitive workforce, a point increasingly highlighted by corporate America’s lobby groups.
The Final Cost: How The Tariff Push Could Backfire On Washington
At a time when the US is competing globally for talent, fighting inflation at home, and courting India as a strategic ally in the Indo-Pacific, this self-inflicted squeeze could prove short-sighted.
The question now is not just whether India will retaliate, but whether the US can afford to sustain this strategy without incurring long-term economic and diplomatic losses.
A newshound, Amit Shukla is a TV news industry professional with over 17 years of experience and currently heads the input department at CNN-News18. He drives the news agenda and scales up coverage of big news …Read More
A newshound, Amit Shukla is a TV news industry professional with over 17 years of experience and currently heads the input department at CNN-News18. He drives the news agenda and scales up coverage of big news … Read More
News explainers Tariff Heat: Why The US May Be Paying The Bigger Price After Slapping 50% Duty On IndiaDisclaimer: Comments reflect users’ views, not News18’s. Please keep discussions respectful and constructive. Abusive, defamatory, or illegal comments will be removed. News18 may disable any comment at its discretion. By posting, you agree to our Terms of Use and Privacy Policy.
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