Donald Trump's 25% tariff: Impact of Trump tariff on Indian businesses

U.S. President Donald Trump announced on Wednesday that a 25% extra import duty, along with a penalty, will be applied to goods coming from India. This new duty will start from August 7. 

The penalty was placed because India has been buying crude oil and military equipment from Russia.

Pakistan, after signing a deal with the US on Thursday, will now face a reduced tariff of 19%. Meanwhile, Bangladesh's tariff has been lowered from 35% to 20%. Earlier in April, Pakistan was hit with a 29% reciprocal tariff.

Tariff Rates by Country: Full list under Trump's executive order

What is the bilateral trade between India and the US?

During 2021–2025, the United States remained India’s largest trading partner in goods. It accounted for about 18% of India’s total exports, 6.22% of imports, and 10.73% of overall bilateral trade.
 
In the financial year 2024–25, trade between the two countries reached $186 billion, with india exporting goods worth $86.5 billion and importing goods worth $45.3 billion. This resulted in a trade surplus of $41 billion for india, up from $35.32 bn in 2023–24 and $27.7 bn in 2022–23.

In the services sector, India exported an estimated $28.7 bn worth of services to the US and imported $25.5 billion, generating a surplus of $3.2 billion. Altogether, india maintained a total trade surplus of approximately $44.4 billion with the U.S. in 2024–25.

However, according to the Global Trade Research Initiative (GTRI), this picture changes when factoring in U.S. revenues from India through education, digital services, financial activities, royalties, and arms trade. When these are considered, the U.S. actually runs a trade surplus of $35–40 billion with India.

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What are the major products traded between the two?

In 2024, India’s top exports to the U.S. included medicines and biological products ($8.1 billion), telecom equipment ($6.5 billion), gems and stones ($5.3 billion), petroleum products ($4.1 billion), auto parts and vehicles ($2.8 billion), gold and precious jewellery ($3.2 billion), cotton garments ($2.8 billion) and iron and steel items ($2.7 billion).

On the other hand, India imported crude oil ($4.5 billion), petroleum products ($3.6 billion), coal and coke ($3.4 billion), polished diamonds ($2.6 billion), electrical machinery ($1.4 billion), aircraft and parts ($1.3 billion) and gold ($1.3 billion) from the U.S.

What will be the impact of the tariffs on this trade?

• The 25% tariff announced by the U.S. on certain Indian goods may:
• Make indian exports more expensive and less competitive in the US market
• Hurt Indian sectors like steel, jewelry, textiles and chemicals
• Increase trade tensions between the two countries
• However, the overall impact may be limited, as $42 billion worth of Indian exports (like pharma and electronics) are exempt from tariffs

What will be the U.S. tariffs on key Indian goods from August 7?

From August 7, the US will impose a 25% import duty on 7 major indian export categories including Steel and iron productsm, Gems and jewelry, Textiles and garments, Leather goods, Processed food items, Chemicals and Plastic products.

These sectors are expected to feel the immediate pressure from the tariff hike.

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