Why Trump’s Tariffs Hit Indian Goods, What It Means For Businesses From August 1 | Explained

Key Highlights:

- US to impose 25 percent tariff and unspecified penalty on Indian imports starting August 1.

- Sectors like textiles, jewellery, auto parts, and garments expected to be hit.

- Trade surplus with the US may shrink; talks for a deal face hurdles.

New Delhi: US President Donald Trump has imposed a 25 percent additional tariff on Indian goods, with an extra penalty for India’s continued import of crude oil and defence equipment from Russia. These measures will be effective from August 1.

Though India and the US are in the middle of negotiating a trade deal, this sudden announcement has created uncertainty among exporters and policy makers.

What Is a Tariff?

A tariff is a tax imposed by a country on goods it imports. This tax is usually paid by importers but is often passed on to consumers, making the imported goods more expensive in the market.

How Much Tariff Will Apply to Indian Goods?

As per Trump’s announcement:

- A 25 percent tariff will apply to a wide range of Indian goods.

- An additional penalty is also planned, though details are not clear yet.

This will be on top of existing US tariffs, like:

- 10 percent general tariff on all goods (since April 2)

- 50 percent on steel and aluminium

- 25 percent on auto and auto parts

So, for example, if Indian textiles currently face a 69 percent duty, they may now face around 94 percent including new tariffs and penalty.

Why Is the US Doing This?

The main reason, according to Trump, is India’s continued trade with Russia, especially oil and military equipment purchases, despite global sanctions. The US is trying to isolate Russia economically due to the Ukraine war.

Trump also claims that India imposes high tariffs on US goods, which he says creates a trade imbalance and restricts American exports.

How Big Is India-US Trade?

The US is India’s largest trading partner in goods.

In 2024–25, bilateral trade stood at USD 186 billion, with India exporting USD 86.5 billion and importing USD 45.3 billion.

India had a USD 41 billion trade surplus with the US.

In services, India also had a USD 3.2 billion surplus.

Combined trade surplus: around USD 44.4 billion in India’s favor.

However, US think tank GTRI says the real balance favors the US, when education, software, arms, and royalties are included.

What Goods Are Most Affected?

The new tariffs will likely hurt Indian exporters in key sectors such as:

- Garments and textiles

- Jewellery and gems

- Leather goods and footwear

- Auto components

- Carpets and handicrafts

Here’s what Indian goods could face from August 1:

Telecom: 25 percent

Gems and Jewellery: 30–38.5 percent (up from 5–13.5 percent)

Agri and Food items: 29–30 percent (up from 14–15 percent)

Apparel: 12 percent + 25 percent, with a possible extra penalty

Is Trump’s Allegation on Indian Tariffs Fair?

While India’s average tariff is about 17 percent, the US average is 3.3 percent. But the US also imposes very high duties on many items:

Dairy products: 188 percent

Cereals & food prep: 193 percent

Oilseeds & fats: 164 percent

Fruits, vegetables: 132 percent

Minerals, metals: 187 percent

So, while India does have higher tariffs than the US, it is not alone, as countries like South Korea (13.4 percent) and China (7.5 percent) have similar trade protection levels.

What’s Next?

The impact of these tariffs will depend on:

- The exact size of the penalty

- How India’s ongoing trade talks with the US move forward

- Whether other countries also face similar penalties

For now, Indian exporters are bracing for higher costs, and policy makers are looking to salvage trade ties before the situation escalates further.

(With PTI Inputs)