New Delhi: India’s ambitious push for self-reliance under the Atmanirbhar Bharat mission may be facing its most serious challenge yet. US President Donald Trump has signed a fresh executive order imposing an additional 25% penalty tariff on Indian imports, effectively doubling the duty rate on several key exports.

The move, announced on August 6, is reportedly linked to India’s continued purchase of discounted Russian crude oil despite repeated warnings from Washington. The latest tariff, coming on top of a previous 25% reciprocal measure announced on July 31, raises the effective tariff rate on Indian goods entering the US to 50%. These will take effect from August 28, although the order leaves room for future negotiations.

Ratings agency Moody’s has warned that the widening tariff gap between India and other Asia-Pacific countries could severely undermine India’s manufacturing competitiveness, particularly in value-added sectors like electronics and machinery. “Beyond 2025, the much wider tariff gap compared with other Asia-Pacific countries would severely curtail India’s ambitions to develop its manufacturing sector,” the agency said in a report released Friday.

The timing of the tariffs could disrupt India’s momentum under its Make in India and Production Linked Incentive (PLI) schemes. Launched in 2020, the PLI scheme spans 14 sectors with a goal to boost domestic manufacturing and reduce reliance on imports. While sectors such as mobile phones and pharmaceuticals have shown encouraging growth, other industries—like solar modules, semiconductors, and textiles—are still gaining traction.

India’s merchandise trade with the United States reached $118 billion in FY24, with exports alone amounting to $78 billion. Major export categories—including electronics, textiles, pharmaceuticals, and machinery—are now staring at cost disadvantages in the world’s largest consumer market.

Moody’s cautions that continued tariff friction could delay much-needed investments in India’s industrial ecosystem and undermine its export competitiveness. “Trade tensions with the US could slow down both FDI inflows and large-scale capacity building in manufacturing,” the report added.

In response to the US move, Prime Minister Narendra Modi struck a defiant tone during a rally in Uttar Pradesh over the weekend. “The world economy is going through many apprehensions — there is an atmosphere of instability,” he said. “Now, whatever we buy, there should be only one scale: we will buy those things which have been made by the sweat of an Indian.”

As India weighs its next steps, observers say the road ahead for Atmanirbhar Bharat may be steeper than before. Negotiations between the two nations appear to be on hold for now, with President Trump reportedly ruling out trade talks until India makes policy changes related to Russian oil.