Trump Imposes 25%+ Tariff On India From August 1: How It Compares Globally, What It Means For Trade | Economy News

Last Updated:July 30, 2025, 20:01 IST

The tariffs, announced by US President Donald Trump, makes India one of the most heavily targeted among Asian trading partners.

Chinese officials remain hopeful that the truce will be prolonged

US Tariff On India: India is set to face 25% tariffs on exports to the US, plus a penalty, starting August 1, 2025. Though the US tariffs on India are lower than Brazil, Bangladesh, Canada, South Africa, Mexico, Thailand and Cambodia; they are higher than the import duties imposed on most countries like South Korea, Malaysia, Vietnam, Indonesia, Japan, and the EU.

“Remember, while India is our friend, we have, over the years, done relatively little business with them because their Tariffs are far too high… INDIA WILL THEREFORE BE PAYING A TARIFF OF 25%, PLUS A PENALTY FOR THE ABOVE, STARTING ON AUGUST FIRST,” US President Donald Trump said in a post on Truth Social, also citing concerns from non-tariff restrictions, and strategic ties with Russia as reasons for the decision.

India vs the World: Where Does It Stand In Context Of US Tariffs?

The move, announced by US President Donald Trump on Wednesday, to impose both the base tariff and a penalty on India makes the country one of the most heavily targeted among Asian trading partners.

An updated analysis of US tariffs shows that India will now face a higher duty rate than major Asian peers like Vietnam, Indonesia, the Philippines, Japan, and even the European Union.

Among 27 countries tracked, Brazil (50%), Laos and Myanmar (40%), and a few others face tariffs equal to or higher than India. With the additional penalty added to the 25% base rate, India’s effective tariff could rise above countries like South Korea and Malaysia, both of which face a flat 25% duty.

US Tariffs: Likely Impact On India-US Trade?

India’s trade with the United States is poised to face significant headwinds starting August 1, with the US imposing a 25 percent tariff plus penalty on Indian goods, which will have a significant bearing on high-growth sectors such as chemicals, machinery, and electronics.

According to UN COMTRADE data, India’s trade with the US nearly doubled over the last decade, rising from $64.6 billion in 2013 to $118.4 billion in 2024. Exports have led the charge, climbing 89.3 per cent, from $42 billion in 2013 to $79.4 billion in 2024, while imports have grown more moderately.

According to a Moneycontrol analysis, the tariff hike will have major consequences for high-growth sectors such as chemicals, machinery, and electronics, which have seen significant export gains in the past decade.

• Machinery and electronics accounted for nearly 25% of India’s exports to the US in 2024, up from under 8% in 2013.
• Chemical exports have also surged as India diversified into high-value goods.
• Traditional sectors like textiles, clothing, and stone products have declined in export share.

Imports from the US have also evolved:

• Fuels made up 31.5% of India’s US imports in 2024 (up from 7% in 2013).
• Metal imports rose from 4.8% to 7.1% over the same period.

What Economists Say

Aditi Nayar, chief economist of ICRA, said, “When the US had initially imposed tariffs, we had lowered our forecast of India’s GDP expansion to 6.2% for FY2026, presuming a tepid rise in exports and a delay in private capex. The tariff (and penalty) now proposed by the US is higher than what we had anticipated, and is, therefore, likely to pose a headwind to India’s GDP growth. The extent of the downside will depend on the size of the penalties imposed.”

Garima Kapoor, economist and executive vice-president of Elara Capital, said, “The 25% tariff rate is certainly a negative development as it compares to lower rate for peers such as Vietnam, Indonesia and Philippines, which compete with India in a similar category of labour-intensive products and electronic goods… The exact details of the tariffs on the exempted items such as pharma and the ones that were charged at a differential rate such as iron, steel and auto are unknown as of now, but the inclusion of pharma into tariffs should be incremental negative for India’s exports as US accounts for more than 30% of India’s pharma exports. If no deal is signed by September-October, we see a downside to the full-year GDP growth estimate for India by 20 bps.”

On the positive side, any hotchpotch deal which would have compelled India to give concessions to its agriculture and dairy sector may have had much deeper ramifications politically, socially, and eventually on livelihoods. A well-negotiated deal that addresses all aspects of trade, investment and tariff and non-tariff barriers by September-October 2025 is likely to yield long-term benefits than a hurried deal. The India-UK deal template, which gave concessions to auto and opened public procurement sector, has shown that India is willing to shed its protectionist tag in sectors where it doesn’t impact the marginal producer, which is a huge departure from its earlier stance, she added.

Trade and Strategic Ties?

Despite the tariff escalation, India-US economic ties have deepened substantially in recent years:

• Bilateral trade rose from $64.6 billion in 2013 to $118.4 billion in 2024, with exports driving much of the growth.
• US FDI into India surged from $20.3 billion in FY17 to $70.7 billion in FY25.
• The US now accounts for 13% of India’s arms imports, up from 8% fifteen years ago, reflecting stronger defence cooperation.

The tariff decision comes just a week after India signed a free trade agreement with the UK, and could disrupt India’s efforts to expand global trade partnerships amid growing protectionism in major markets.

Mohammad Haris

Haris is Deputy News Editor (Business) at news18.com. He writes on various issues related to personal finance, markets, economy and companies. Having over a decade of experience in financial journalism, Haris h…Read More

Haris is Deputy News Editor (Business) at news18.com. He writes on various issues related to personal finance, markets, economy and companies. Having over a decade of experience in financial journalism, Haris h… Read More

view comments

First Published:

Read More