The Double Blow: How U.S. Tariffs on India Are Squeezing Small Businesses and Straining a Vital Alliance 

The recent imposition of 50% U.S. tariffs on Indian goods has triggered a devastating chain reaction, crippling small businesses in American “Little India” enclaves like Iselin, New Jersey, where Diwali celebrations are muted as soaring prices for staples, saris, and gold have decimated sales by up to 70% and eroded the community trust that sustains these cultural hubs.

Simultaneously, the policy has strained the critical U.S.-India geopolitical relationship, fostering speculation in India about reducing investment in America and creating a “deep, maybe irreparable rift” by disrupting trade and skilled worker visas, underscoring that the tariffs ultimately function as a tax on American consumers and small businesses while jeopardizing a partnership deemed vital by leaders on both sides.

The Double Blow: How U.S. Tariffs on India Are Squeezing Small Businesses and Straining a Vital Alliance 

The festive lights of Diwali, the Hindu festival symbolizing the triumph of light over darkness, are glowing a little dimmer this year in places like Iselin, New Jersey. Along Oak Tree Road, the vibrant heart of a community known as “Little India,” the usual pre-holiday bustle has been replaced by a palpable anxiety. The colorful saris, the aromatic spices, and the gleam of gold jewelry—all central to the celebration—are now shadowed by stark new price tags. 

This shift in atmosphere stems from a decision made far from the shop floors of New Jersey. On August 27, 2025, the Trump administration imposed sweeping 50% tariffs on goods imported from India. What reads in headlines as a blunt instrument of trade policy is, on the ground, a seismic event fracturing the foundation of small businesses and testing the resilience of the deeply interconnected U.S.-India relationship. 

This isn’t just a story about economic theory; it’s a human story about trust, tradition, and the unintended consequences of geopolitical maneuvering. 

The Empty Aisles of Little India: A Ground-Level View of Tariffs 

To understand the impact of a 50% tariff, you must walk the aisles of Subzi Mandi, a South Asian supermarket that is typically a hub of community life. Today, a manager describes the store as “empty.” The bulk purchases of staples like rice, flour, and oil have dwindled. Customers, he notes, are now buying only what they need for the day, a clear sign of tightened budgets and economic fear. 

This behavioral change reveals the first layer of the tariff’s impact: it is a direct tax on the American consumer and the small American business owner. The store owner in Iselin, not the manufacturer in Mumbai, is often the one forced to absorb a significant portion of the price increase to retain customers, decimating their profit margins. 

Nowhere is this more evident than in the gold trade, a cornerstone of Indian culture, especially during Diwali. At Reema Jewelers, owner Ashok Sethi watches as a 30-year legacy threatens to dissolve. The tariffs have contributed to gold prices soaring past $4,200 an ounce, leading to near-40% price increases in his store. 

“When [customers] look at something they want to buy, they get completely astonished to see the new price,” Sethi says. His sales have plummeted by 60-70%. The tradition of buying gold is being rewritten by economic necessity, with families opting for individual pieces instead of full sets. 

Pradip Sangari of Aanchal Saris captures the sentiment with the clarity of an economist: “anytime is not a good time for tariffs.” His busiest season has become his most painful, a stark reminder that policies crafted in Washington have immediate and devastating repercussions on Main Street—or in this case, Oak Tree Road. 

Beyond the Price Tag: The Erosion of Community Trust 

The damage extends beyond balance sheets. The very social fabric of enclaves like Little India is woven from threads of trust and long-standing relationships. Ashok Sethi’s business is built over decades on serving a community where 90% of his customers share his heritage. This is a place where business is personal. 

This ecosystem is now under threat from a double squeeze. As local margins vanish, large, well-capitalized Indian conglomerates like Tata’s Tanishq jewelry are expanding onto Oak Tree Road. While these corporations bring scale, they cannot instantly replicate the deep, generational trust that is the lifeblood of the existing small businesses. 

As author Angela Chitkara expresses, there is a tangible fear for the long-term viability of the family-run grocery store where she shops with her mother. This is more than a potential business closure; it’s the potential loss of a cultural anchor—a place that offers not just goods, but a sense of identity and home for a diaspora community. The tariffs are inadvertently accelerating a process of corporatization that could homogenize these unique cultural spaces. 

A View from India: Derisking and a Deepening Rift 

The story does not end in New Jersey. The ripple effects are felt across the Atlantic, where the perspective is equally grim. From meetings with business leaders and government officials in India’s major cities, a consistent narrative emerges: the U.S.-India relationship is suffering a “deep, maybe irreparable rift.” 

The pain points are multifaceted: 

1. Economic Suffering: Indian exporters are reeling, disrupting supply chains and business models built over years. 

1. H-1B Visa Restrictions: Changes to this program are upending the plans of skilled Indian professionals, severing a critical pathway for knowledge exchange and talent flow that has benefited U.S. tech companies immensely. 

1. Strategic Derisking: Perhaps most alarmingly, there is active speculation in Indian business circles about reducing investment in the United States. This is the exact opposite of the stated goal of many U.S. trade policies. Instead of bringing supply chains closer, it is pushing them apart, an outcome that would harm both economies. 

There is a bittersweet silver lining some in India point to: a potential slowdown in the “brain drain.” Yet, this is overshadowed by a profound sadness. The United States, home to the largest Indian diaspora in the world, has long been a “beacon of hope and opportunity.” The current policies are perceived as a rejection of that open spirit, threatening a relationship that former Secretary of State Antony Blinken rightly called “among the most consequential relationships of any in the world.” 

The Path to Restoration: Insight Over Ignorance 

So, what is the way out of this self-inflicted wound? The insights from those on the front lines provide a clear blueprint. 

New Jersey Governor Phil Murphy, just back from his second trade mission to India, strikes the right chord: “This is too important a relationship not to get right … We belong together.” His actions—offering tax incentives for Indian companies to create jobs in New Jersey—demonstrate a constructive alternative to punitive tariffs. He recognizes that the strength of states like his is built by attracting global talent and investment, not walling it off. 

Ashok Sethi, the jeweler, offers an even more potent prescription. If he could speak to President Trump, he would argue that “tariffs might sound like a quick fix, but they often hurt American consumers and small businesses. The real way to build strength is by investing in our people, our factories, and new technology so we can compete globally on quality.” 

This is the modern-day triumph of knowledge over ignorance that the Diwali season calls for. It is a shift from a zero-sum, protectionist mindset to one of collaborative competition and mutual investment. 

The solution isn’t to ignore trade disputes, but to address them through targeted negotiations and strategic investments that enhance both nations’ competitiveness. It means: 

• Supporting immigrant entrepreneurs who are vital to economic vitality, not taxing their cultural connections. 

• Streamlining, not stifling, the flow of high-skilled talent that fuels innovation. 

• Incentivizing co-investment in critical technologies and supply chains that make both economies more resilient. 

The lights on Oak Tree Road this Diwali are a testament to the resilience of a community. But they also serve as a warning. The U.S.-India relationship is a complex tapestry woven from threads of commerce, kinship, and shared democratic values. Blunt instruments like mass tariffs fray these threads, harming American businesses, alienating a critical ally, and dimming the beacons of opportunity that have long defined both nations. The path to restoration requires not just lifting tariffs, but actively rebuilding the trust they have broken.