Rupee Touches Fresh Low at ₹87.80 Amid Trump’s Trade Threats Against India

On August 5, the Indian rupee dropped to a record closing level of ₹87.80 against the U.S. dollar, weighed down by renewed tariff threats from former U.S. President Donald Trump. Markets responded to his warning of further steep duties on Indian goods—citing India’s purchases of Russian oil—prompting caution across financial circles and spotlighting broader tensions between two major economies.

Introduction
India’s currency fell 14 paise in a single session, pressuring import costs, investor sentiment, and equity market performance. Though the rupee briefly neared its all-time low of ₹87.95, central bank intervention and resilient export appetite prevented a deeper fall. Analysts warn that unless trade rhetoric cools, the currency may head toward psychological ₹88 territory.

Trump’s Tariff Threats and Its Ripple Effects

Trump has threatened to raise already instituted 25% tariffs on Indian imports further—blaming India for profiting from discounted Russian oil purchases. The announcement added fresh geopolitical risk to markets, potentially denting Indian export competitiveness amid uncertain global trade dynamics.

Market Reaction and RBI Intervention

The rupee weakened intra-day to ₹87.89 before recovering slightly at close. This drop continues a broader trend, with the currency down 2.5% year-to-date against major Asian peers. The RBI intervened by selling dollars via state-run banks to shield the rupee from crossing the ₹88 mark.

Comments from Economists

Some economists note that the rupee’s depreciation might soften the blow of U.S. tariffs by making exports relatively cheaper—a small silver lining. However, concerns remain: equity outflows, profit warnings, and rising import pressure could offset any currency gains.

What’s Next: RBI’s Policy and Market Outlook

With the RBI holding the repo rate steady at 5.5%, all eyes now turn to monetary policy outcomes and forex reserves. A further rate cut could weaken the rupee further, although it might also support domestic growth amid inflation cooling and global uncertainty.

Relevance for Tier-2 India

For consumers and businesses in smaller Indian cities, a weaker rupee means more expensive imports—fuel, electronics, raw materials. Even if exports gain a price edge, the impact of costlier goods often filters into local economies via transport, manufacturing and lending rates.

Conclusion
The rupee’s slide to ₹87.80 underscores how quickly geopolitics can influence domestic markets. As U.S.-India trade tensions intensify, policymakers find themselves balancing currency stability with growth objectives. For now, unless dialogue replaces threats, the rupee seems set for continued volatility ahead