Rupee Poised to Weaken Amid Prospect of Higher U.S. Tariffs on Indian Exports
July 30, 2025 – Mumbai
The Indian rupee is set to deepen losses against the U.S. dollar as India prepares to face increased tariffs on its exports to the United States. Market sentiment turned negative following comments from U.S. President Donald Trump indicating a potential tariff hike in the range of 20% to 25%. This development comes amid ongoing portfolio outflows and stoked concerns about trade tensions between the two countries.
Rupee Slips Beyond Key Level
The one-month non-deliverable forward (NDF) contract for the rupee was trading in the 87.11 to 87.13 range against the U.S. dollar early Wednesday, signaling a weakening trend and marking the currency’s weakest level in four months. The rupee had closed at 86.8150 on Tuesday.
Market experts view the breach of the psychologically significant 87-per-dollar level as an indicator of increased pressure on the currency, fueled by trade uncertainties. The Reserve Bank of India (RBI) may intervene if the weakness accelerates, according to a trader at a state-owned bank.
U.S. Tariff Threat and Trade Negotiations
President Trump’s remarks suggested the administration is considering imposing a 20% to 25% tariff on certain Indian exports, although he noted the deal had not yet been finalized. An earlier Reuters report highlighted that India has held off on granting fresh trade concessions ahead of an August 1 deadline set by Washington.
Despite the tariff threat, New Delhi intends to resume trade negotiations when a U.S. delegation visits next month. Both sides aim to negotiate and finalize a comprehensive bilateral trade deal by September or October, according to a government official.
Comparative Trade Deals Heighten Pressure
India’s delay in reaching a trade agreement with the U.S. contrasts with the swift deals recently finalized by other nations. Regional peers such as Indonesia and Vietnam, as well as major U.S. trading partners including Japan and the European Union, concluded trade agreements with Washington in July. This places India at a potential disadvantage and may contribute to the rupee’s vulnerability.
Market Reactions and Key Indicators
Traders described President Trump’s comments as a “knee-jerk reaction,” interpreting them as negative signals for the Indian currency and economy. Foreign institutional investors have been net sellers of Indian assets, with National Securities Depository Limited (NSDL) data showing net outflows of $689 million from Indian equities and $66.4 million from Indian bonds on July 28. Meanwhile, the U.S. dollar index dipped slightly to 98.7, while most Asian currencies firmed. Brent crude oil prices edged up 0.2% to $72.60 per barrel. The 10-year U.S. Treasury yield stood at 4.33%.
Looking Ahead
Market participants are closely watching the upcoming U.S. Federal Reserve monetary policy announcement, expected later Wednesday during U.S. trading hours, for further cues on global capital flows and currency movements.
India’s ability to navigate mounting external pressures—including the specter of higher U.S. tariffs and continued capital outflows—will be crucial to stabilizing the rupee. The success of bilateral trade negotiations with the U.S. delegation next month will be key to easing trade tensions and restoring investor confidence.
Reporting by Jaspreet Kalra; Editing by Sumana Nandy
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