US President Donald Trump on Wednesday announced a fresh round of import tariffs on Indian goods, slapping a 25 per cent additional duties along with an unspecified penalty. The new duties, which come into effect on August 1, are being imposed in response to India’s ongoing high tariffs and purchases of crude oil and military hardware from Russia.
The announcement has come despite ongoing trade talks between the two countries, catching many by surprise and triggering volatility in financial and export markets.
Here’s all you need to know about the tariffs:
US announcement
A 25 per cent import duty will apply on Indian goods entering the US, over and above existing tariffs. An additional penalty-details of which are yet to be made public- has also been proposed. The full duty structure is expected to be laid out in an executive order from the White House.
For instance, Indian textile products currently attract a US import tariff of 6 to 9 per cent. With the new duty, the effective rate would rise to 31 to 34 per cent. A separate penalty could raise this further.
In addition to this blanket 25 per cent, there are already sector-specific US duties- 50 per cent on Indian steel and aluminium, and 25 per cent on auto and auto parts.
Why is the US imposing these tariffs?
The US has cited its growing trade deficit with India as a primary reason, accusing India of maintaining high tariffs on American products and limiting US market access. India’s continued purchases of Russian oil and weapons have also been flagged by the White House.
Also read: 'Busy day' at White House-25% tariff on India; 'dead economies' jibe, trade deal with Pakistan & more
India–US trade significance
The US is India’s largest trading partner in goods. In the financial year 2024–25, bilateral trade between the two countries reached 186 billion US dollars.
Of this, Indian exports to the US stood at 86.5 billion dollars, while imports from the US were valued at 45.3 billion dollars. This resulted in a merchandise trade surplus of 41 billion dollars in India’s favour.
In the services sector, India exported around 28.7 billion dollars worth of services to the US and imported services worth 25.5 billion dollars. This yielded a services trade surplus of 3.2 billion dollars.
Together, India maintained an overall trade surplus of approximately 44.4 billion dollars with the US during the period.
However, according to the think tank GTRI, the US runs a hidden surplus of 35 to 40 billion dollars when factoring in earnings from education, digital services, financial activities, royalties, and arms trade.
What are the key sectors in India–US trade?
India's major export sectors to the US in 2024 included:
From the US, India imported:
How will the new tariffs affect Indian exports?
Tariffs increase the cost of goods in the destination market, in this case the US, potentially reducing demand for Indian products. The impact will vary by sector depending on how price-sensitive the end market is.
Exporters say labour-intensive sectors are most vulnerable. These include:
These industries compete with countries like Bangladesh, Vietnam, and Thailand, which already face 20 to 36 per cent duties in the US. The added tariff could erode India’s pricing advantage in these segments.
What will be the effective US tariff on key Indian goods from August 1?
From August 1, telecom products such as mobile components imported from India into the United States will face a 25 per cent tariff. Gems and jewellery, including cut diamonds and gold items, are expected to attract a combined tariff of 30 to 38.5 per cent—up from the current 5 to 13.5 per cent.
Food and agricultural goods will now be subject to tariffs in the range of 29 to 30 per cent, compared to the present 14 to 15 per cent. Apparel exports will face a total duty of 37 per cent, combining the existing 12 per cent with the newly imposed 25 per cent tariff. These rates may increase further depending on how the penalty component is ultimately applied.
Is there substance to Trump’s claim that India imposes high tariffs?
Experts, quoted by PTI, disagree with this claim. While India’s average tariff rate is about 17 per cent, it is broadly in line with other emerging economies such as South Korea (13.4 per cent) and China (7.5 per cent).
By contrast, the US itself imposes very high duties on several categories of goods, including:
Dairy products: 188 per cent Fruits and vegetables: 132 per cent Coffee, tea, cocoa, and spices: 53 per cent Cereals and food preparations: 193 per cent Oilseeds, fats, and oils: 164 per cent Beverages and tobacco: 150 per cent Minerals and metals: 187 per cent Chemicals: 56 per cent
What happens next?
The Indian government is currently assessing the impact of the move and is expected to explore options at the World Trade Organization or through bilateral channels.
Exporters say India may need to pivot to other large markets such as the European Union, Latin America, and Southeast Asia to limit the fallout. However, India’s export base is diverse, and the long-term impact will depend on whether the US measures are sustained or eventually rolled back as part of trade negotiations.
The announcement has come despite ongoing trade talks between the two countries, catching many by surprise and triggering volatility in financial and export markets.
Here’s all you need to know about the tariffs:
US announcement
A 25 per cent import duty will apply on Indian goods entering the US, over and above existing tariffs. An additional penalty-details of which are yet to be made public- has also been proposed. The full duty structure is expected to be laid out in an executive order from the White House.
For instance, Indian textile products currently attract a US import tariff of 6 to 9 per cent. With the new duty, the effective rate would rise to 31 to 34 per cent. A separate penalty could raise this further.
In addition to this blanket 25 per cent, there are already sector-specific US duties- 50 per cent on Indian steel and aluminium, and 25 per cent on auto and auto parts.
Why is the US imposing these tariffs?
The US has cited its growing trade deficit with India as a primary reason, accusing India of maintaining high tariffs on American products and limiting US market access. India’s continued purchases of Russian oil and weapons have also been flagged by the White House.
Also read: 'Busy day' at White House-25% tariff on India; 'dead economies' jibe, trade deal with Pakistan & more
India–US trade significance
The US is India’s largest trading partner in goods. In the financial year 2024–25, bilateral trade between the two countries reached 186 billion US dollars.
Of this, Indian exports to the US stood at 86.5 billion dollars, while imports from the US were valued at 45.3 billion dollars. This resulted in a merchandise trade surplus of 41 billion dollars in India’s favour.
In the services sector, India exported around 28.7 billion dollars worth of services to the US and imported services worth 25.5 billion dollars. This yielded a services trade surplus of 3.2 billion dollars.
Together, India maintained an overall trade surplus of approximately 44.4 billion dollars with the US during the period.
However, according to the think tank GTRI, the US runs a hidden surplus of 35 to 40 billion dollars when factoring in earnings from education, digital services, financial activities, royalties, and arms trade.
What are the key sectors in India–US trade?
India's major export sectors to the US in 2024 included:
- Drug formulations and biologicals: 8.1 billion dollars worth exported
- Telecom instruments such as mobile parts and networking gear: 6.5 billion dollars
- Precious and semi-precious stones including cut diamonds: 5.3 billion dollars
- Petroleum products like refined fuel: 4.1 billion dollars
- Vehicles and auto components: 2.8 billion dollars
- Gold and other precious metal jewellery: 3.2 billion dollars
- Ready-made garments made of cotton and accessories: 2.8 billion dollars
- Products made of iron and steel: 2.7 billion dollars
From the US, India imported:
- Crude oil: 4.5 billion dollars
- Petroleum products such as liquefied natural gas: 3.6 billion dollars
- Coal and coke: 3.4 billion dollars
- Cut and polished diamonds: 2.6 billion dollars
- Electric machinery and components: 1.4 billion dollars
- Aircraft, spacecraft, and parts: 1.3 billion dollars
- Gold: 1.3 billion dollars
How will the new tariffs affect Indian exports?
Tariffs increase the cost of goods in the destination market, in this case the US, potentially reducing demand for Indian products. The impact will vary by sector depending on how price-sensitive the end market is.
Exporters say labour-intensive sectors are most vulnerable. These include:
- Garments and textiles
- Leather and non-leather footwear
- Gems and jewellery
- Carpets and handicrafts
These industries compete with countries like Bangladesh, Vietnam, and Thailand, which already face 20 to 36 per cent duties in the US. The added tariff could erode India’s pricing advantage in these segments.
What will be the effective US tariff on key Indian goods from August 1?
From August 1, telecom products such as mobile components imported from India into the United States will face a 25 per cent tariff. Gems and jewellery, including cut diamonds and gold items, are expected to attract a combined tariff of 30 to 38.5 per cent—up from the current 5 to 13.5 per cent.
Food and agricultural goods will now be subject to tariffs in the range of 29 to 30 per cent, compared to the present 14 to 15 per cent. Apparel exports will face a total duty of 37 per cent, combining the existing 12 per cent with the newly imposed 25 per cent tariff. These rates may increase further depending on how the penalty component is ultimately applied.
Is there substance to Trump’s claim that India imposes high tariffs?
Experts, quoted by PTI, disagree with this claim. While India’s average tariff rate is about 17 per cent, it is broadly in line with other emerging economies such as South Korea (13.4 per cent) and China (7.5 per cent).
By contrast, the US itself imposes very high duties on several categories of goods, including:
What happens next?
The Indian government is currently assessing the impact of the move and is expected to explore options at the World Trade Organization or through bilateral channels.
Exporters say India may need to pivot to other large markets such as the European Union, Latin America, and Southeast Asia to limit the fallout. However, India’s export base is diverse, and the long-term impact will depend on whether the US measures are sustained or eventually rolled back as part of trade negotiations.
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