In a move poised to reshape trade relations, former U.S. President Donald Trump has announced the imposition of a 25% tariff on goods imported from India, set to take effect on August 1, 2025. This decision, revealed via a post on his social media platform, Truth Social, also includes an additional, yet unspecified, penalty. Trump justified the tariffs by citing India's high tariff rates, "obnoxious" non-monetary trade barriers, and its continued trade with Russia.
The announcement has triggered concerns across various sectors in India, with the government stating that it is "studying its implications" and remains committed to a "fair, balanced and mutually beneficial" trade agreement with the U.S. Despite this commitment, the imposition of tariffs has raised alarms, particularly given that the U.S. is India's largest trading partner.
Impact on Indian Exports
The newly announced duties target several of India's top-performing export sectors. Key sectors expected to be affected include automobiles and auto components, steel, aluminum, smartphones, solar modules, marine products, gems and jewelry, and select processed food and agricultural items. However, pharmaceuticals, semiconductors, and critical minerals have been excluded from the tariff list.
The Gem & Jewellery Export Promotion Council (GJEPC) has voiced strong concern, noting that the U.S. is India's largest export destination for gem and jewelry products, accounting for over $10 billion annually, nearly 30% of the industry's global exports. They cautioned that a tariff of this scale would increase costs, create shipment delays, distort pricing structures, and exert tremendous stress on the entire value chain.
Historical Trends in India-US Trade
Despite the current trade tensions, the long-term import-export trend between India and the U.S. has been upward, underscoring the strategic and economic importance both countries place on their bilateral ties. In the first quarter of FY 2025-26 (April–June), India's trade dynamics with the United States witnessed a robust shift, with exports soaring and imports declining, positioning the US as India's top trading partner during the period.
Exports to the U.S. in June 2025 increased by 23.53%, reaching USD 8.3 billion, while imports fell by 10.61%, totaling around USD 4 billion. For the April–June 2025 quarter, exports grew by 22.18% to USD 25.51 billion, helping generate a positive trade surplus. India's goods trade surplus with the U.S. rose to $41.18 billion in fiscal year 2025, up 16.6% from $35.33 billion a year ago. The increase was driven by an 11.6% rise in exports to $86.51 billion, while imports from the U.S. grew 7.4% to $45.33 billion.
India's Response and Future Outlook
Following Trump's announcement, the Indian government said it had taken note of the statement and would take all steps necessary to secure its national interest and that it was committed to a "fair, balanced" trade agreement.
Experts suggest that the trade deal is still possible and hope for a resolution, considering the strategic alignment between the U.S. and India. A U.S. delegation is scheduled to arrive in India on August 25 to continue discussions regarding the bilateral trade agreement.
While the imposition of tariffs presents a challenge, the Indian government is committed to protecting the interests of its farmers, entrepreneurs, and MSMEs. The government is also drawing parallels to the recent trade agreement signed with the UK, suggesting that it will take all necessary steps to secure its national interest.
