US announces 25% tariff plus penalty on India; govt says it's studying implications

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Studying its implications, says govt

The Centre on Wednesday said it is studying the implications of US President Donald Trump's announcement to impose 25 percent tariffs on Indian goods, along with a penalty from August 1.

"The government has taken note of a statement by the US President on bilateral trade. The government is studying its implications," an official statement said, as per a PTI report.

India and the US have been engaged in negotiations on concluding a fair, balanced and mutually beneficial bilateral trade agreement over the last few months.

"We remain committed to that objective," the statement said.

"The government attaches utmost importance to protecting and promoting the welfare of farmers, entrepreneurs, and MSMEs. The Government will take all steps necessary to secure our national interest, as has been the case with other trade agreements, including the latest Comprehensive Economic and Trade Agreement with the UK," it added.

Why exporters are worried

US President Donald Trump's announcement to impose a sweeping 25 per cent tariff plus penalty on India from August 1 will be a big blow to the country's exports and adds a fresh layer of uncertainty, exporters said on Wednesday.

They said that in the absence of clarity on the penalty's scope, Indian exporters and US importers are unable to accurately calculate landed costs or plan how to absorb the elevated tariff burden.

"The announcement by Trump...comes as a big blow for India. With US being one of the key export destinations, this will severely impact the sectors like gems and jewellery that are heavily dependent on exports and is one of the biggest contributors to the economy of the country," Kama Jewelry MD Colin Shah said.

The domestic gems and jewellery industry of India has already been bearing the brunt of the prolonged geopolitical tensions between Russia-Ukraine and Middle East for almost over two years.

"Going ahead, we expect trade activities to remain muted with the US," he said.

Sharing similar views, Federation of Indian Export Organisations (FIEO) Director General Ajay Sahai said the US decision has added a fresh layer of uncertainty for businesses on both sides.

"Exporters largely view this disruption as a temporary setback, anticipating that a comprehensive trade agreement will bring stability, correct asymmetries, and ultimately create new avenues for trade and recovery," Sahai said.

He added that this lack of predictability is disrupting supply chain planning and pricing decisions.

Mumbai-based exporter and founder chairman of Technocraft Industries India Sharad Kumar Saraf said that this announcement will create further uncertainty. "We need stability in these tariffs." India's goods exports to the US rose by 23.53 per cent to USD 8.3 billion in June while imports dipped by 10.61 per cent to about USD 4 billion during the month, according to the commerce ministry data.

During April-June, the country's exports to the US increased by 22.18 per cent to USD 25.51 billion, while imports rose 11.68 per cent to USD 12.86 billion, the data showed.

The US was India's largest trading partner in the April-June quarter of 2025-26.

India and the US are negotiating a bilateral trade agreement. The US team is visiting India in August for the sixth round of talks for the pact.

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). 

GTRI's Ajay Srivastava's take on Trump's tariff

Why is it not exactly bad news? GTRI's Ajay Srivastava's take 

While Trump’s announcement of a 25% tariff plus penalty on Indian goods appears harsh, a closer look shows that India is not significantly worse off than countries that did sign deals with the U.S. The UK, EU, Japan, Indonesia, and Vietnam now face elevated tariffs, and in return, have given sweeping concessions—zero tariffs on U.S. farm goods, massive investment pledges, and purchases of U.S. oil, gas, and arms. India has made no such concessions.

India did not walk away from the deal; it negotiated in good faith but refused to cross its red lines—particularly on agriculture, where over 700 million livelihoods are at stake. Trump’s justification for the tariffs—India’s tariffs, trade barriers, and ties with Russia—doesn’t stand up to scrutiny. India’s tariffs are WTO-compliant, non-tariff barriers are common globally, and discounted Russian oil has helped India manage inflation during global volatility.

India is not alone; over 90 countries face similar pressure from the U.S. A deal may still emerge, but only on fair terms. For now, India’s principled stand has avoided the trap of a one-sided deal—and that’s a success.

FICCI President disappointed by US tariffs on Indian exports

FICCI President Harsha Vardhan Agarwal expressed disappointment over US President Donald Trump’s decision to impose a 25% tariff and secondary sanctions on Indian exports starting August 1, 2025.

He acknowledged the move would negatively impact exports but hoped it would be short-lived and that a permanent trade agreement between India and the US would be finalised soon.

“FICCI is disappointed by the decision taken by the U.S. to levy a 25% tariff on exports from India and impose secondary sanctions. While this move is unfortunate and will have a clear bearing on our exports, we hope that this imposition of higher tariffs will be a short-term phenomenon and that a permanent trade deal between the two sides will be finalised soon,” said Agarwal.

“India and the U.S have a long-standing partnership, which is strengthened by our deepening engagement across an array of areas from technology to defence to energy and advanced manufacturing. There is a lot our two countries can achieve together, and FICCI is confident that following the detailed deliberations that are currently underway, we will see beneficial outcomes for both countries when the contours of the final trade agreement will emerge,” he added.

Agarwal highlighted the strong and evolving India-US partnership across sectors like technology, defence, energy, and advanced manufacturing, and expressed confidence in positive outcomes following ongoing deliberations.

India has been negotiating a bilateral trade agreement (BTA) with the US since early 2025, but has resisted specific US demands that conflict with national interest. A US team is expected in August to continue discussions, with hopes of concluding talks by September-October 2025. Agarwal emphasised the importance of securing a balanced, long-term deal over a rushed one and noted India’s value as a market and talent base for US companies.

Trump's past trade deals pose challenge for India's negotiations

In the wake of US President Donald Trump’s decision to impose 25 per cent tariff on India, the fact that he earlier has secured trade deals with the EU, Japan, UK, and Indonesia by extracting steep concessions while offering little in return has posed challenges for India ahead of its sixth round of negotiations with the US.

The EU committed to zero tariffs on select US goods and $600 billion in investments, while Japan agreed to $550 billion in investments aiding US chipmakers. Indonesia gave critical mineral access and eliminated 99% tariff barriers.

These deals weaken India’s negotiating stance, especially on food security and digital trade. India has already slashed tariffs on key US exports like bikes, cars, smartphone parts, and even removed the digital tax. Trump is pressuring India to buy American weapons and energy, which could compromise national security and economic interests. Without matching reciprocal tariffs, Indian exports risk losing competitiveness. Despite past concessions in the UK FTA, India's gains from a US deal remain uncertain. Read the full story here: Why India should be wary of Trump's trade deals with EU, other nations

How other nations have fared with Trump

While India faces a 25% American tariff from August 1, other economies like Japan, Indonesia and EU have struck deals with the US to bring down threatened tariffs. Here is how India compares with a few other nations:

Congress MPs slam Trump's tariffs, target Modi

Congress MP Mallu Ravi said Trump is making threats to the Indian government and has imposed a 25-per-cent tariff on imports from India. He said this is not acceptable to India.

Another Congress MP, Chamala Kiran Kumar Reddy, said Modi claims that Trump is his best friend, but the US president's agenda was clear that he wanted to impose tariffs on India. He demanded that the government negotiate a trade deal with the US quickl,y as it will affect exports and the economy.

Trump has announced a 25-per-cent tariff on India from August 1 amid signs of a stalemate in the ongoing negotiations between the two countries on a bilateral trade deal.

US tariffs to severely impact India's seafood exports, says expert

 India's seafood exports, especially shrimps, will be "severely" impacted due to the imposition of a higher US tariff of 25 per cent plus penalty to be effective from August 1, agri-economist Ashok Gulati said on Wednesday.

US President Donald Trump's decision to impose higher tariffs on all Indian goods is "very bad" and "shocking", Gulati said, adding that he had expected a tariff of only 10-15 per cent.

"This clearly shows Trump is unpredictable and punitive," he told PTI.

Gulati said the move will "severely impact" the country's shrimp exports, and Ecuador, with lower tariffs and a closer geographical location to America, will gain.

Apart from shrimp exports, India will see the impact of higher US tariffs on textiles.

"The huge advantage we gain with the India-UK free trade deal will get neutralised with the high US tariffs," he added.

Will US, India negotiate again for bilateral free trade?

A team from the US is scheduled to visit India next month for the next round of negotiations for a proposed bilateral trade agreement.

India and the US teams concluded the fifth round of talks for the agreement last week in Washington.

India's chief negotiator and special secretary in the Department of Commerce Rajesh Agrawal and Assistant US Trade Representative for South and Central Asia Brendan Lynch held the deliberations. 

However, with Trump now announcing a 25% tariff plus penalty on India, there is no clarity yet on the negotiation timelines.