The United States has imposed several tariffs on India as part of its trade policy under the Trump administration in 2025.
Here’s a detailed overview based on available information:
Current US Tariffs on India
1. 25% Tariff on Indian Imports:
• Effective from August 1, 2025, the US imposed a 25% tariff on a wide range of Indian goods. This was announced by President Donald Trump on July 30, 2025, and affects nearly all Indian exports to the US, valued at approximately $87 billion in 2024.
• An unspecified penalty was also mentioned, linked to India’s trade with Russia, particularly for purchasing Russian oil and military equipment. The exact details of this penalty remain unclear, adding uncertainty to the trade landscape.
2. Previous Tariff Announcements:
• On April 2, 2025, the US announced a 26% reciprocal tariff on Indian goods as part of a broader policy targeting over 180 countries. This included a 10% baseline tariff on all imports, with an additional 16% country-specific tariff for India.
• This tariff was temporarily suspended on April 9, 2025, for a 90-day period to allow for trade negotiations, maintaining only the 10% baseline duty during this time. The suspension was extended until August 1, 2025, but the 25% tariff was reinstated after negotiations failed to yield a trade deal by the deadline.
3. Exemptions and Specific Sectors:
• Pharmaceuticals and semiconductors are exempt from the tariffs, providing some relief to these critical Indian export sectors.
• Specific tariffs include a 25% duty on automobiles, auto parts, steel, and aluminum, which could impact profitability in these sectors.
• Sectors like oil and gas also benefit from exemptions, while others, such as chemicals and cereals, face the 25% levy, with impacts varying based on demand elasticity and competition.
Impact on Indian Sectors
The 25% tariff affects several key Indian export sectors, including:
• Electronics and Technology: India is a significant exporter of smartphones, particularly iPhones, to the US, contributing 44% of US iPhone imports in Q2 2025. The tariffs threaten competitiveness and could disrupt plans to expand manufacturing in India.
• Textiles and Apparel: These labor-intensive sectors face challenges as the tariff increases prices, making Indian products less competitive against regional peers like Vietnam and Bangladesh.
• Gems and Jewelry: Representing over 30% of India’s global jewelry trade, this sector faces supply chain disruptions and reduced competitiveness.
• Auto Components: India’s low export volume to the US in this sector limits the overall impact, but profitability could still be affected.
• Pharmaceuticals: While exempt, the sector faces indirect challenges due to broader trade tensions.
• Seafood and Processed Foods: These sectors are also impacted, with price negotiations ongoing to determine how much of the tariff burden exporters can absorb.
The tariffs are expected to reduce India’s GDP growth by 0.2 to 0.5 percentage points, though government sources describe the impact as “negligible” and “manageable.”
India’s Response
• Diplomatic Engagement: India is prioritizing dialogue over retaliation, with Commerce Minister Piyush Goyal emphasizing the protection of farmers, entrepreneurs, and MSMEs. Negotiations for a bilateral trade agreement (BTA) continue, with a US delegation expected in New Delhi on August 24, 2025, for the sixth round of talks.
• Firm Stance on Sensitive Sectors: India has ruled out opening its agriculture and dairy sectors, citing food security and the livelihoods of millions. It has also resisted US demands for genetically modified (GM) food imports and broader market access for US agricultural products.
• Retaliatory Measures: India has reserved the right to impose retaliatory tariffs under WTO norms, particularly in response to US tariffs on steel and aluminum. However, the WTO’s Appellate Body paralysis limits the effectiveness of such measures.
• Diversification: Trade experts recommend diversifying export markets to mitigate risks from US trade policies.
• Rejection of False Claims: The Ministry of External Affairs debunked reports suggesting India was reviewing US goods exemptions or suspending bilateral agreements, reaffirming its commitment to a fair trade deal.
Tariff Rates for Other Countries
The US has imposed varying tariff rates on other trading partners, often as part of its “reciprocal tariff” policy:
• China: Faces a 30% tariff (reduced from 145% after negotiations).
• Vietnam: 20% tariff (down from a proposed 46%).
• South Korea: 15% tariff after securing a trade deal.
• Japan: 15% tariff, though some sectors face up to 25%.
• Indonesia: 19% tariff following a trade agreement.
• Pakistan: 19% tariff, with a deal to develop oil reserves.
• Bangladesh: 20% tariff, though some analyses cite higher rates.
• Canada: 35% tariff on most goods.
• Mexico: 30% tariff as of July 2025.
• Brazil: 50% tariff on most goods, with exemptions for aircraft, energy, and orange juice.
• EU: 15% tariff, with significant energy and investment commitments.
• Kosovo: Eliminated tariffs on US goods, facing only the 10% baseline tariff.
India’s 25% tariff is higher than that of some competitors like Vietnam, Indonesia, and Pakistan, potentially putting Indian exports at a disadvantage.
Context and Rationale
The US justifies these tariffs on several grounds:
• Trade Deficit: The US had a $45.8 billion trade deficit with India in 2024, which the Trump administration aims to reduce.
• High Indian Tariffs: The US cites India’s average applied tariff of 15.9% (per WTO 2024 data) and high non-tariff barriers, particularly on agricultural products (up to 39–50% on items like vegetable oils and apples).
• Geopolitical Factors: The tariffs include a penalty for India’s trade with Russia, particularly for oil and military equipment, amid US pressure to align with Western policies on Ukraine.
• Negotiation Leverage: The tariffs are seen as a pressure tactic to extract concessions in ongoing trade talks, with the US pushing for India to open its agriculture, dairy, and government procurement markets, ease intellectual property laws, and increase purchases of US energy and defense products.
Broader Implications
• Economic Impact: While the macroeconomic impact on India’s GDP is estimated to be modest (0.2–0.5% reduction), specific sectors like textiles, gems, and electronics face significant challenges. Indian exporters may need to absorb part of the tariff cost, reducing profit margins, or risk losing market share to competitors like Vietnam and Bangladesh.
• Stock Market and Currency: The Indian stock market has remained relatively resilient, with experts suggesting a rangebound response rather than a crash. However, currency volatility and foreign investment flows could be affected if tariff uncertainty persists.
• US Consumers: Higher tariffs on Indian goods could increase prices for US consumers, particularly for pharmaceuticals, textiles, and electronics, where India is a key supplier.
• Trade Negotiations: Both countries aim to double bilateral trade to $500 billion by 2030, but the tariffs and US demands for concessions complicate talks. India insists on a “mutually beneficial” deal, rejecting one-sided terms.
Conclusion
The US tariffs on India, currently set at 25% with an unspecified penalty, target a broad range of exports, impacting sectors like electronics, textiles, gems, and auto components, while sparing pharmaceuticals and semiconductors. India is responding with a focus on dialogue, protecting sensitive sectors like agriculture, and exploring retaliatory measures within WTO frameworks. Compared to other countries, India faces a relatively high tariff rate, which could erode its competitive edge unless a favorable trade deal is secured. Ongoing negotiations, with the next round in late August 2025, will be critical to mitigating these impacts and strengthening US-India trade ties.