Key points
- US doubles tariffs on India
- Foreign investors exit Indian markets
- Tariffs threaten GDP and jobs
ISLAMABAD: The Indian rupee slumped to record lows, breaching the 88-per-dollar threshold for the first time amid growing concerns that punitive US tariffs could weigh on economic growth and further dampen portfolio inflows.
According to Reuters, Washington this week imposed an additional 25 per cent tariff on Indian exports, effectively doubling the total duties levied on the country to 50 per cent.
Rupee hits record low, falls to as low as 88.29 / $.
Read here: https://t.co/7O1KeWB6UF pic.twitter.com/1GfXomFCe6
— Ira Dugal (@dugalira) August 29, 2025
On Friday’s evening , the Indian rupee closed at 88.1950 per US dollar, down 0.65 per cent on the day, its sharpest single-day fall in nearly three months. During the session, the currency hit an all-time low of 88.3075, likely prompting intervention from the Reserve Bank of India. For August, the rupee declined 0.68 per cent, primarily driven by Friday’s losses, marking its fourth consecutive monthly drop.
India’s balance of payment stress
“The US tariffs are likely to prolong India’s balance of payment stress, keep financial flows weak, and widen the trade deficit,” said Dhiraj Nim, FX strategist at ANZ Bank.
“My view remains bearish on the rupee, with dollar/rupee likely to rise more despite a broadly weaker dollar.”
🇮🇳 INDIAN RUPEE CRASHES TO RECORD LOW AFTER U.S. TARIFF SHOCK
The rupee just sank to ₹87.97 per dollar, its weakest ever, after Washington doubled tariffs on Indian exports to 50%.
The move slams everything from textiles to machinery, ripping into India’s trade lifeline.… https://t.co/sNUP7OzCtG pic.twitter.com/1aD9KBAVO5
— Mario Nawfal (@MarioNawfal) August 29, 2025
Economists have warned that the tariffs could shave 60–80 basis points off India’s GDP growth if maintained over the course of a year, potentially compounding pressure on an already slowing economy. The Reserve Bank of India currently forecasts economic growth of 6.5 per cent for the financial year ending 31 March.
Although Indian exports to the US represent only 2.2 per cent of GDP, a marked slowdown in labor-intensive sectors such as textiles and jewelry could trigger job losses and exacerbate the economic toll, according to economists.
Steepest fall
With foreign portfolio inflows remaining subdued, the tariffs risk further widening India’s trade deficit and straining its balance of payments. So far this year, foreign portfolio investors have withdrawn $9.7 billion from Indian debt and equities. More than $1 billion was pulled from Indian equities alone in the two trading sessions following the announcement of the new US tariffs.
From ₹59 to One Dollar that UPA left behind in 2014
— Mod’s Rupee Sinks to Record Low of almost ₹88 =$1 !!
Jai Ho Andh Bhakts — Taali ! https://t.co/tr3l91m91S— Jawhar Sircar (@jawharsircar) August 29, 2025
Indian stock markets recorded their steepest fall since March this week.
Despite the rupee’s weakness against a broadly softer dollar, its depreciation, hitting a fresh all-time low against the Chinese yuan on Friday, may somewhat offset the adverse effects of the heightened US tariffs.
“This is not a bad thing though because the trade weighted real effective exchange rate is now at the lowest level in 2 years and should help boost competitiveness,” analysts at J.P. Morgan noted.
Court: Trump tariffs illegal
A US appeals court on Friday ruled that most of former President Donald Trump’s tariffs are illegal, stating he overstepped his authority under the International Emergency Economic Powers Act (IEEPA). Despite this, the court has allowed the tariffs to remain in effect until October 14, giving the Trump administration time to appeal to the Supreme Court.
Trump had used the IEEPA to impose widespread tariffs, typically 10% or higher, on many U.S. trading partners, citing national emergencies and drug-related concerns. The 7-4 ruling from the Court of Appeals supports an earlier decision that Trump misused his emergency powers.
The administration is expected to appeal the ruling.
