Indian Rupee Slumps as U.S. Tariffs Escalate on Exports

A Currency Under Pressure

The Indian rupee tumbled on Tuesday, slipping toward record lows against the U.S. dollar after Washington confirmed a fresh 25% tariff on Indian-origin goods, effectively doubling existing duties to 50%. The move adds a new layer of strain to New Delhi’s trade outlook, intensifying pressure on both exporters and financial markets.

Impact on Trade and Growth

Analysts warn the tariff escalation could deliver a heavy blow to India’s export sector, already grappling with slowing global demand. The combined effect of higher duties could shave off up to 0.8 percentage points from India’s annual economic growth, according to preliminary estimates.

Key export categories facing pressure include:

• Furniture and consumer goods, a major focus of the tariff hike.
• Textiles and manufactured products, where India has significant U.S. market exposure.
• Pharmaceuticals and specialty chemicals, sectors that may face indirect ripple effects.

Why the Rupee is Falling Despite Dollar Weakness

Ordinarily, a softening U.S. dollar would support emerging-market currencies. But in this case, tariff risks are overwhelming that effect, leaving the rupee under intense selling pressure.

Traders cited concerns that:

• India’s trade balance will deteriorate, pushing up current account deficits.
• Foreign investor confidence could weaken if export competitiveness erodes.
• The Reserve Bank of India (RBI) may be forced to intervene more aggressively to stabilize currency markets.

Market Reaction

The rupee traded around 87.80 per U.S. dollar, its weakest level in months. Indian equities also felt the heat, with shares of furniture retailers and export-driven firms sliding. Meanwhile, government bond yields climbed as traders priced in higher inflation risks from imported goods.

Why It Matters

The tariff shock underscores the fragility of emerging-market currencies in a volatile trade environment. For India, the timing is particularly challenging, coming as policymakers balance inflation management with the need to sustain growth.

As one analyst summed it up: “The rupee is caught between a weaker dollar and a harsher trade reality—right now, the tariffs are winning.”