Rupee Hits 4-Month Low Amid Trump Tariffs

MUMBAI – The Indian Rupee witnessed a sharp depreciation on Wednesday, closing at ₹87.43 against the US dollar, marking its weakest level since mid-March. This significant slump, a 52-paise fall in a single day, comes amid escalating fears over the impending imposition of a 25% tariff on all Indian imports by US President Donald Trump, set to take effect from August 1, 2025.

President Trump confirmed the sweeping new trade restrictions on Wednesday, citing India's "far too high" tariffs and "most strenuous and obnoxious non-monetary trade barriers." Crucially, he also announced an additional, unspecified "penalty" for India's continued substantial purchases of energy and military equipment from Russia, directly linking economic policy to geopolitical alignments. This move has amplified market uncertainty and directly contributed to the Rupee's rapid descent.

Indian exporters are now bracing for significant disruption. Sectors heavily reliant on the US market, such as textiles, gems and jewelry, and auto parts, face the prospect of their products becoming uncompetitive due to the new 25% duty. Industry bodies have warned that this could severely squeeze export margins and lead to a substantial drop in order volumes, particularly as the August 1 deadline draws near. Many international buyers are already holding back orders, awaiting clarity on the trade situation.

Beyond the direct impact on exports, analysts warn that the new tariffs threaten to widen India's current account deficit, putting further downward pressure on the Rupee. The currency's recent weakness is also exacerbated by sustained outflows of foreign institutional investments from Indian equities and a general increase in month-end dollar demand from importers. Rising global crude oil prices are adding to the headwinds, as India is a major oil importer.

While Indian officials have stated they are "studying the implications" and remain committed to a "fair, balanced, and mutually beneficial bilateral trade agreement," the immediate impact on the Rupee underscores the market's anxiety. Despite ongoing trade negotiations, with a US team expected in India later in August, the lack of a breakthrough before the August 1 deadline has left investors and exporters in a precarious position.

The sharp fall of the Indian Rupee highlights the immediate economic ramifications of President Trump's aggressive trade policies. As India navigates this complex geopolitical and economic landscape, the stability of its currency and the fate of its export-oriented industries will remain under intense scrutiny.