Trump’s tariff shocker: How India’s commodities and currency reacted

In a dramatic escalation of trade tensions, U.S. President Donald Trump imposed a 25% tariff on all Indian imports effective August 1, 2025, followed by an additional 25% tariff on August 6. The move, part of a broader geopolitical strategy targeting India’s continued trade with Russia, has had immediate and far-reaching consequences across India’s financial and commodity markets.

Bullion: Gold and Silver Soar to New Heights

The most striking reaction came from the bullion market. On 8th August, Indian gold prices surged to a new lifetime high, driven by global uncertainty, a weakening rupee, and fears of inflationary pressures stemming from the tariffs. Silver prices also rallied, hovering near recent highs.

The tariffs may directly impact India’s gems and jewellery industry, as it is one of the largest exported items from India to the US.

With U.S. buyers facing higher costs, demand for Indian gold jewellery may decline abroad, but domestic investors have turned to gold as a safe haven. The surge in prices reflects both speculative buying and a hedge against currency depreciation.

Energy Commodities: Crude Oil and Natural Gas Decline

In contrast, crude oil and natural gas prices in India fell sharply following the tariff announcements. This counterintuitive move was largely driven by fears of reduced global demand and potential oversupply, as India—one of the world’s largest oil importers—faces trade penalties for continuing to buy discounted Russian oil.

The U.S. tariffs, viewed as a penalty for India’s energy ties with Russia, have created uncertainty in global energy flows. Traders anticipate that India may diversify its oil sources, potentially reducing spot market demand. Additionally, the broader risk-off sentiment in global markets has weighed on energy prices, with natural gas futures also declining amid expectations of slower industrial activity.

Base Metals: Volatility Takes Center Stage

Base metals such as copper, aluminium, zinc, and lead have experienced heightened volatility. These metals are critical to India’s engineering and manufacturing exports, many of which are now subject to the 25% tariff.

Copper and aluminium, in particular, saw sharp intraday swings as traders weighed the impact of reduced export competitiveness against potential increase in domestic demand. With U.S. buyers likely to shift sourcing to other countries, Indian exporters face shrinking order books. However, some domestic manufacturers may benefit from reduced export competition, creating a complex and volatile pricing environment.

Currency Markets: Rupee Nears Record Lows

The Indian rupee has not been spared. It is trading near Rs 88 against the dollar, near its record weak levels. The depreciation reflects investor concerns over India’s trade balance, potential capital outflows, and the broader economic impact of the tariffs.

A weaker rupee makes imports more expensive, adding to inflationary pressures, but it also makes Indian exports more competitive globally—though this advantage is largely offset by the tariffs themselves.

Broader Implications and Outlook

The tariffs have triggered a chain reaction across India’s economy. But India’s response has been measured. Rather than retaliate with counter-tariffs, the government is focusing on trade negotiations and structural reforms. Meanwhile, the government is exploring trade diversification strategies, including boosting exports to Europe, Africa, and Southeast Asia.

In the short term, volatility is likely to persist across commodities and currency markets. But in the long run, this episode may accelerate India’s push for self-reliance, trade diversification, and deeper integration into global supply chains.

(The author is Head of Commodity Research, Geojit Investments Limited)