Understanding the impact of Trumps 25 percent tariff on India
President Trump's announcement of a 25% import duty on all Indian exports, coupled with an unspecified penalty for purchasing Russian oil and military hardware, significantly escalates the US-India trade dispute. This follows existing tariffs on steel, aluminum, and autos. The article analyzes the implications of these tariffs, focusing on their economic consequences and the future of US-India trade relations.
New Delhi: US President Donald Trump has announced that from August 1, there will be an additional 25 percent import duty on all Indian exports. The duty is set to be implemented on all goods and services imported from India. Apart from that, President Trump has slapped an unspecified penalty on India for purchasing discounted crude oil and military hardware from Russia. The announcement came amid the ongoing negotiations of a bilateral trade agreement (BTA) between the two parties. The article cuts the clutter around US tariffs and tries to explain the impact of the latest Trump tariffs.
Understanding the New US Tariffs
Firstly, let's talk about what a tariff is. A tariff is a customs duty or import duty that the country levies on its importers. The importer has to pay the duty to the government of the respective importing country. The additional impact in the form of excess duty is generally passed to the end customers, thereby making products uncompetitive and expensive.
Secondly, the US has announced that it will impose an additional 25 percent tariff along with an unspecified penalty over the existing 10 percent tariff that it levied on April 2, 2025. However, the US has not given the quantum of the penalty and how it is set to be implemented.
Thirdly, there already exist 50 percent tariffs on steel and aluminum and 25 percent on autos and their additional parts. The new duty structure is set to apply over the above-mentioned tariffs. To give an example, textiles attract a 6 to 9 percent tariff at present, and after the announcement, the sector will now attract a 31 to 34 percent duty.
The US administration complains of the huge trade deficit that it has with India, blaming New Delhi for not giving its market access to American-made goods while simultaneously imposing high tariffs on them.
India-US Bilateral Trade
In the year 2024-2025, the bilateral trade between India and the US touched $186 billion. The US was the largest trading partner in goods trade between 2021 and 2025. The US accounts for about 18 percent of India's total exports. and 6.22 percent for total import. Additionally, the US accounts for 10.73 percent of the total bilateral trade of India.
In goods trade, India has a trade surplus (the difference between imports and exports) of $41 billion in the year 2024-2025. The same figure was around $35 billion for the year 2023-2024, and for 2022-2023, the surplus amount stands at around $28 billion. In services, India exported an estimated $28.7 billion and imported $25.5 billion, adding a $3.2 billion surplus.