‘In a nightmare’: India braces for big layoffs as Trump’s tariffs bite

New Delhi, India – In a sprawling market in the Indian capital, Anuj Gupta sits in a corner of his shop as silence hangs over it.

Gupta sources and exports garment accessories – like laces and buttons – to major global brands. But punishing tariffs imposed by United States President Donald Trump have brought Gupta’s business to its knees.

On Wednesday morning, India woke up to 50 percent tariffs imposed on its goods sold to the US, after the Trump administration followed through on its threat of doubling levies from 25 percent over India’s purchase of Russian oil. The White House says Prime Minister Narendra Modi’s government, among the top buyers of crude from Russia, is financing Moscow’s war in Ukraine. Indian officials have accused Washington of double standards, pointing towards how the European Union and China buy more from Russia and how Washington, too, still trades with Moscow.

In the fashion world, the cycle runs a year ahead, explains Gupta – clothes are being designed and made for autumn 2026 at the moment. So, the hovering uncertainty in the market has “hampered the work badly”, leaving a “big dent”, he said. Up to 40 percent of his business is in the US market.

Gupta said until Wednesday morning, he was still hoping against hope. “Maybe Trump is just bullying us for optics, or maybe Modi’s good relations with the US will rescue the situation,” he thought. “But we were the worst dealt.”

Five rounds of talks have failed to yield a trade deal between Washington and New Delhi, and Gupta said exporters now fear their customers might give up on India altogether. “If these tensions prolong, then buyers would look for alternative markets for sourcing,” he said.

As New Delhi grapples with Trump’s moves that walk the US back from two decades of diplomatic and strategic investments in India, analysts and economic observers say the tariffs could devastate key export-driven sectors of the Indian economy, with hundreds of thousands of jobs at risk.

Ajay Sahai, the CEO of the Federation of Indian Export Organisation (FIEO), the largest government-backed body of Indian exporters, was cautiously hopeful of help from the Modi administration after meeting the country’s finance minister, Nirmala Sitharaman, on Thursday.

“The government has fully assured us that they will provide all kinds of support needed to navigate this problem, perhaps including an economic package,” Sahai told Al Jazeera.

“The government has asked us to prepare a report, and then they will come up with a scheme,” he said. “[Sitharaman] has assured that there will be no layoffs – and that’s something we should honour.”

Yet, that’s easier said than done.

Textiles, gems, jewellery, carpets and shrimp are some of India’s biggest exports to the US – and are expected to be among the worst hit by the tariffs.

K Anand Kumar, who manages shrimp exporting company Sandhya Marines and employs nearly 3,500 workers in a coastal town in Andhra Pradesh state on the Bay of Bengal, said that his business is on the verge of collapse.

More than 90 percent of his company’s cargoes head to the US market.

Last year, India exported an all-time high of 1.78 million metric tonnes of seafood worth $7.38bn. Shrimp dominates, contributing 92 percent of the total value. And the US takes in more than 40 percent of India’s shrimp shipments.

“The shrimp industry is a very highly labour-intensive sector, with small farmers,” said Kumar, who also leads the seafood export association’s Andhra Pradesh chapter. Taking everyone into account, Kumar said, nearly two million people are associated with shrimp exports.

Kumar said more than 50 percent of those workers will bear the direct brunt of Trump’s tariffs.

“We are already laying off because we can’t keep paying salaries with no orders in line for us,” Kumar told Al Jazeera. “The small farmers, who peel the shrimp, will be worst affected because there is no work now to employ them.”

Exporter associations estimate that the tariffs could affect nearly 55 percent of India’s $87bn worth of merchandise exports to the US – and benefit competitors such as Vietnam, Bangladesh and China, which have been tariffed at lower rates.

Moody’s Ratings has noted that Trump’s tariffs on Indian imports could slow India’s economic growth. Beyond 2025, the ratings agency said, the much wider tariff gap compared with other Asia Pacific countries would severely curtail India’s ambitions to develop its manufacturing sector and may even reverse some of the gains made in recent years in attracting related investments.

“It is like being in a nightmare,” Kumar said, “where you do not know what new, random tariff number you wake up to next.”

In the last 30 years of business with the US, Kumar said, the crisis feels uncharted. “The US is toying with us, doing whatever they want,” he said. “And we are forced to adjust. It feels so helpless.”

Nearly 1,000km (620 miles) from Kumar’s factory, fear has taken over Tiruppur, a town in the southern state of Tamil Nadu that is the capital of India’s garment export industry.

Lying on the banks of the Noyyal river and next to rocky hillocks, Tiruppur contributes nearly a third of the total $16bn ready-to-wear garment exports. Tiruppur’s earnings in US dollars have earned it the name of ‘Dollar City’. The world’s top fashion brands, including Zara and Gap, source clothes from here.

But while higher margins in the case of big brands give some businesses temporary breathing space, a prolonged crisis could cripple them, said V Elangovan, managing director of SNQS International Group, which exports garments.

“Wherever margins are lower, the production has been halted altogether,” he said. Elangovan’s company employs 1,500 people. He said about 150,000 workers stand to lose their jobs due to Trump’s tariffs in Tiruppur.

“It is very difficult to find a new customer in this economy,” he said. “Customer diversification is not like a switch, which we can turn on and off. Soon, in the future, we will be looking at cash flow issues, and there will be a lot of retrenchment of the workers.”

India’s Modi has meanwhile taken a defiant stance on the trade war with the US.

India “should become self-reliant … Economic selfishness is on the rise globally and we mustn’t sit and cry about our difficulties,” Modi said in his Independence Day speech on August 15 from the ramparts of New Delhi’s Red Fort.

“Modi will stand like a wall against any policy that threatens their interests. India will never compromise when it comes to protecting the interests of our farmers,” the prime minister had said, referring indirectly to sticking points in trade negotiations with the US, which wants greater market access to India’s agriculture and dairy sectors. Almost half of India’s 1.4 billion people depend on agriculture for their livelihood.

But traders fear that they could be left bleeding in the bargain.

“The government is letting us get punched in one eye to save the other eye,” said Elangovan. “A 50 percent tariff is practically an embargo on Indian goods.”