The United States has recently implemented significant changes to its import system. These modifications are expected to have various effects on international trade dynamics. To understand how these changes may impact the Indian economy, check the article below.
Historic Overview of U.S. Tariffs on India
Following India’s independence in 1947, trade between the U.S. and India was limited, with tariffs not being a significant point of contention. However, in 2002, the United States imposed tariffs ranging from 8 percent to 30 percent on imported steel to protect domestic producers.
While India was not the primary target, these measures hampered steel exports. Later, in 2018-2019, President Donald Trump’s administration increased tariffs on a variety of goods, including steel and aluminum, citing national security concerns.
Trump’s new reciprocal tariffs
On July 30, 2025, President Donald Trump announced a 25 percent tariff on Indian imports over India’s purchase of discounted Russian oil, which came into effect on August 7, 2025, marking a significant escalation in trade tensions between the two nations. It was argued in the White House that India is indirectly funding Russia’s war against Ukraine through the oil trade.
On August 6, 2025, President Trump announced an additional 25 percent tariff on Indian imports, raising the total to 50 percent, in response to India’s continued purchase of discounted Russian oil. The 50 percent tariff came into effect on August 27, 2025, impacting key Indian exports such as garments, gems and jewellery, footwear, sporting goods, furniture, and chemicals.
On August 29, 2025, the United States officially terminated its long-standing de minimis tariff exemption, which allowed goods worth under $800 to enter the country without import duty.
Now, every package coming in will be taxed, though for the next six months, postal shippers can choose to pay a flat fee of $80–$200 per parcel, depending on where it comes from. According to this, for India, it will be charged $200 per parcel.
Rationale Behind India’s Russian Oil Imports
India continues to buy Russian Oil in order to maintain energy security while avoiding an increase in inflation, balance of payments pressure, and higher subsidy costs. As a major energy importer that meets approximately 80 percent of its crude oil needs through imports, India switched to Russian oil after the Ukraine war because it was less expensive than alternatives from Iraq or the United States.
Additionally, India has already invested heavily in upgrading refineries to process Russia’s Ural-grade crude, which was previously a minor part of its oil mix, making Russian supplies both economically and operationally feasible.
U.S. Court Ruling on Tariffs
The U.S. appeals court ruled that several tariffs imposed under the Trump administration exceeded the president’s authority under the International Emergency Economic Powers Act (IEEPA). The court clarified that the power to levy such tariffs rests with Congress, but the tariffs will remain in effect until October to allow time for a possible appeal to the Supreme Court.
Trump criticized the ruling on Truth Social that without these tariffs, the U.S. would be “completely destroyed” and its military power “instantly obliterated,” calling the 7-4 ruling by what he described as a “Radical Left group of judges” wrong, while thanking one Obama-appointed Democratic judge for supporting the country.
U.S. Officials and Public Perspectives
Former US Ambassador to the United Nations Nikki Haley argued that India is critical for the US, particularly in balancing China’s influence. She urged India to respond to President Trump’s concerns about Russian oil.
In a Newsweek article, she called India a “valued democratic partner” and stated that resolving trade issues is critical for both countries. She cited India’s growing economy, large young population, and role in shifting key supply chains away from China. Haley emphasized that India is not an enemy and that open, positive dialogue is required to maintain and strengthen the US-India relationship.
Impact On the Indian Economy
India’s nominal GDP stood at $4,270 billion in FY2025 and would typically achieve 6.5 percent growth in FY2026 under standard circumstances. India’s exports of goods and services hit an all-time high of $824.9 billion in 2024-25. In FY 2024-25, the total exports to the U.S. were $86.51 billion (~2 percent of total GDP).
According to GTRI, 30 percent of exports will remain duty-free, 4 percent of auto parts will attract a 25 percent tariff, and 66 percent, including apparel, textiles, gems and jewelry, shrimp, carpets, and furniture, will face a 50 percent tariff.
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Sector-Wise Impact
1. Textiles & Apparel
The textile sector, a key component of India’s export economy, is now facing significant headwinds as a result of the newly imposed 50 percent US tariff. This sharp increase significantly reduces India’s competitive advantage in one of its largest export markets. Leading players such as Vardhman Textiles Ltd, Arvind Ltd, and Welspun India Ltd are expected to be hit the hardest, as the total tariff on their goods will now be around 59 percent–63.9 percent, impacting margins, global market share, and overall sector growth.
2. Gems & Jewellery
India’s gems and jewelry industry, particularly in cities such as Surat and Mumbai, is facing a crisis. The United States, a major buyer of Indian jewelry, has imposed a new tariff, which may result in a sharp drop in exports. Titan Company Ltd, Kalyan Jewellers India Ltd, PC Jeweller Ltd, and others will face a total tariff of 52.1 percent.
3. Shrimp (Vannamei)
India is a major shrimp exporter, particularly to the United States, but the new 60 percent tariff has severely impacted the sector, resulting in a sharp drop in exports. Companies that have been most affected include Nekkanti Sea Foods Ltd, Devi Sea Foods Ltd, and Apex Frozen Foods Ltd.
4. Automobiles & Auto Parts
India’s automobile sector, particularly those exporting to the United States, is struggling with a 25 percent tariff on automobiles and auto parts. This is likely to reduce exports and lower profits. Maruti Suzuki India Ltd, Mahindra & Mahindra Ltd, Tata Motors Ltd, and others will now face a 26 percent tariff.
5. Carpets
A 50 percent tariff imposed by the United States has put pressure on India’s carpet industry, particularly in Uttar Pradesh and Jammu and Kashmir. This has already resulted in a sharp drop in shipments. Companies such as Obeetee Ltd, Kashmir Woollen Industries Ltd, and Brintons India Ltd will face a total tariff of 52.9 percent.
6. Machinery & Equipment
Higher tariffs in the United States are posing challenges for India’s machinery and equipment sector, which is critical to industrial growth. This affects companies that manufacture industrial machinery and equipment. Bharat Heavy Electricals Ltd (BHEL), Larsen & Toubro Ltd (L&T), Kirloskar Brothers Ltd, and other companies now have a total export tariff of 51.3 percent.
7. Pharmaceuticals
With steady demand from the United States and 0 percent tariffs on medicines, India’s pharmaceutical sector remains largely unaffected. As the “pharmacy of the world,” India continues to experience high demand for generic medications. Sun Pharmaceutical Industries Ltd., Dr. Reddy’s Laboratories Ltd., and Cipla Ltd. are among the top companies that will benefit.
8. Smartphones & Electronics
India’s smartphone and electronics exports to the United States are unaffected because tariffs on these products remain at zero percent. Companies like Samsung India Electronics Pvt. Ltd., Xiaomi Technology India Pvt. Ltd., and Lava International Ltd. can continue to export without incurring additional costs. The sector remains less competitive in the United States, with export volumes expected to rise steadily.
India’s Next Diplomatic Steps
As per the sources, at the 2025 SCO summit in Tianjin, India strengthened its diplomatic engagement with both China and Russia. With China, talks focused on boosting trade and investment, reducing the trade gap, fighting terrorism together, and making travel and business easier. With Russia, India strengthened its partnership, discussing economic and security cooperation and supporting a world where no single country dominates.
Global Reactions to India’s Diplomacy
White House spokesperson Anna Kelly commended Trump’s foreign policy, pointing out his ability to negotiate agreements, such as a ceasefire between India and Pakistan, and his cordial rapport with Prime Minister Modi, noting the continued close collaboration between the United States and India on commercial, defense, and diplomatic issues.
Ro Khanna, an Indian American congressman, criticized President Donald Trump for undermining decades of strategic partnership between the United States and India by imposing punitive tariffs on Indian goods, including a 25 percent levy on Russian oil imports.
Khanna attributed the high tariffs imposed because India did not nominate Trump for the Nobel Peace Prize, as Pakistan did, and he also warned that these policies are harming Indian exports and US manufacturers and pushing India closer to China and Russia.
He encouraged Indian Americans to speak out against the President, emphasizing that Trump’s ego should not jeopardize the critical US-India relationship. These comments came after Prime Minister Narendra Modi’s talks with China’s Xi Jinping and Russia’s Vladimir Putin at the Shanghai Cooperation Organisation (SCO) summit in China.
Russian President Vladimir Putin criticized the United States for imposing tariffs on India and China, stating that Washington “cannot talk to India or China in that way,” emphasizing that both countries are powerful, sovereign partners with histories shaped by colonialism who will not tolerate being treated as subjects to be punished.
He characterized the US tariff regime as an attempt to weaken its leadership, urged respect when dealing with such major economies, and expressed confidence that tensions would eventually subside and normal political dialogue would resume.
US tariffs on other countries
The U.S. has imposed significant tariffs on multiple countries besides India, many of which were later reduced. For instance, tariffs on China were initially set at 125 percent, later being lowered to 30 percent. Japan faced tariffs of 24 percent, later reduced to 15 percent.
Bangladesh saw tariffs of 37 percent, later cut to 20 percent, while Cambodia’s tariffs dropped from 49 percent to 19 percent. Similarly, tariffs on the European Union were reduced from 20 percent to 15 percent, and Pakistan’s from 29 percent to 19 percent.
Conclusion
Despite the problems caused by new tariffs, the United States and India remain close partners. The United States relies on India to help deal with China, improve supply chains, and keep the region stable, whereas India values trade, technology, and security ties with the United States while maintaining good relations with China and Russia in order to remain independent.
If both countries communicate respectfully and focus on what they have in common, the dispute can be resolved, and their partnership can continue to grow in trade, technology, and security.
Written by Akshay Sanghavi
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