Indian Rupee Nears Record Low as Trump’s Tariff Threatens Growth

The rupee extended its losses, weakening toward a record low after US President Donald Trump announced plans to of at least 25% on Indian exports, higher than previously anticipated.

The currency fell as much as 0.4% to 87.7375 per dollar in early Mumbai trading, approaching the all-time low of 87.9563 reached in February. Equities also declined, with the NSE Nifty 50 Index falling as much as 0.9%.

The rupee has declined more than 2% in July, on track for its worst monthly performance in nearly three years, and ranks as Asia’s weakest currency this year. The depreciation has raised concerns about higher import costs, potentially straining an already fragile economic recovery.

If the new tariffs hold, India’s economic growth may take a likely hit of around 0.3 percentage points, Goldman Sachs Group Inc. analysts, including Santanu Sengupta , wrote in a note.

If the sentiment remains weak for much longer, the rupee may gradually weaken past 88 per dollar, said Dhiraj Nim , economist and FX strategist at Australia & New Zealand Banking Group Ltd. The central bank is expected to intervene in the currency market and prevent the rupee from immediately weakening past the 88 mark, he said.

President Trump’s threat to impose a 25% levy on Indian goods alongside a penalty over the country’s energy purchases from Russia is a steeper hit than the 15% to 20% range applied on several regional peers.

“The latest announcement is a downside surprise,” said Michael Wan , currency strategist at MUFG Bank Ltd. “At the same time, other countries which compete directly with India also got lower rates and so competitive advantage for India’s export sector could be eroded to some extent if these proposed tariff rates stick.”