Trump tariff's impact on Indian businesses explained
The announcement was unexpected, given that both countries are in the midst of trade agreement negotiations. The following Q&A outlines the implications of the US decision.
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What is a tariff?
These are customs or import duties imposed on the import of goods. The importer has to pay this duty to the government. Normally, companies pass on these taxes to end users.
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Who's most at risk from Trump's 25% India tariffs
How much tariff is announced on India?
The US has announced to impose a 25 per cent tariff plus penalty for buying Russia's crude oil and military equipment. However, the US has not specified the quantum of the penalty and how it will be imposed. An executive order from the White House on the 25 per cent tariff plus penalty will give clarity on the duty structure.
A 10 per cent duty (announced on April 2) applies to all goods.
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Besides, there is a 50 per cent tariff on steel and aluminium, and 25 per cent on auto and auto parts. These duties are imposed over and above the existing tariffs on Indian goods. For example, textiles attract a 69 per cent tariff at present, so after adding the 25 per cent, Indian textile goods entering the US from August 1 will attract a 31-34 per cent duty. A penalty could be added further on this.
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Why is the US imposing these tariffs?
The US has alleged that it faces a significant trade deficit with India, blaming New Delhi for imposing high tariffs on American goods, which it says restricts US exports to the Indian market.
What is bilateral trade between India and the US?
Between 2021 and 2025, the United States remained India's top trading partner in goods. It accounted for nearly 18% of India's exports, 6.22% of its imports, and 10.73% of total bilateral trade. In 2024–25, trade between the two nations reached USD 186 billion, with India exporting USD 86.5 billion and importing USD 45.3 billion, resulting in a USD 41 billion trade surplus.
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In services, India exported an estimated USD 28.7 billion and imported USD 25.5 billion, adding a USD 3.2 billion surplus.
Altogether, India ran a total trade surplus of about USD 44.4 billion with the US.
However, according to think tank GTRI, the US runs a USD 35-40 billion overall surplus when revenues from education, digital services, financial activities, royalties, and arms trade are factored in.
What are the major products traded between the two?
In 2024, India's main exports to the US included drug formulations and biologicals (USD 8.1 billion), telecom instruments (USD 6.5 billion), precious and semi-precious stones (USD 5.3 billion), petroleum products (USD 4.1 billion), vehicle and auto components (USD 2.8 billion), gold and other precious metal jewellery (USD 3.2 billion), ready-made garments of cotton, including accessories (USD 2.8 billion), and products of iron and steel (USD 2.7 billion).
Imports included crude oil (USD 4.5 billion), petroleum products (USD 3.6 billion), coal, coke (USD 3.4 billion), cut and polished diamonds (USD 2.6 billion), electric machinery (USD 1.4 billion), aircraft, spacecraft and parts (USD 1.3 billion), and gold (USD 1.3 billion). *What will be the impact of the tariffs on this trade?
Import duty makes goods expensive in the importing country. Besides, a few other factors also play a role in this. For example, duty on India's competitor nations such as Bangladesh (35 pc), Vietnam (20 pc) and Thailand (36 pc); and quality and standards of items.
According to exporters, Indian labour-intensive goods such as garments, leather and non-leather footwear, gems and jewellery, carpets and handicrafts may get impacted due to this duty.
What will be the US tariffs on key Indian goods from August 1?
Telecom - 25 pc; gems and jewellery - 30-38.5 pc (5-13.5 pc at present); food and agri goods - 29-30 pc (14-15 pc currently); apparel 12 pc plus 25 pc. Penalty component may also be there from August 1.
Is there a substance to Trump's allegations that India has very high tariffs?
The US also imposes high duties on items like dairy products (188 per cent), Fruits and vegetables (132 per cent), Coffee, tea, cocoa and spices (53 per cent), Cereals and food preparations (193 per cent), Oilseeds, fats and oils (164 per cent), beverages and tobacco (150 per cent), Minerals and metals (187 per cent), and Chemicals (56 per cent).
India's average tariff rate of 17 per cent is higher than the US's 3.3 per cent, but similar to other major economies like South Korea (13.4 per cent) and China (7.5 per cent).
(With PTI inputs)
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