Effects Of US Tariffs On India: Impact, Affected Products, Rates & India’s Response

On 6th August 2025, Donald Trump has again increased the Tariff by further 25% thus making the total interest rate by 50% hike in Tariff on some goods in India. The stock market is now counting on the cumulative effects of US tariffs on India to counter this situation.

India’s continuous purchase of Russian Oil has provoked the USA to increase Tariffs on India. This is one of the highest tariffs charged by any country on its trading partner. Additionally this will create lots of worry as India now has $87 billion worth of exports in the US at a continuous risk.

Now, the worry is how it can affect the Stock Market of India. You need to prepare yourself well before making investments in US stocks now.

Donald Trump’s Additional Tariffs On Indian Imports

On August 6, 2025, U.S. President Donald Trump signed an executive order imposing an additional 25% tariff on Indian imports, bringing the total tariff to 50% when combined with a previous 25% tariff announced on July 31, 2025.

This move was primarily in response to India’s continued purchase of Russian oil, which the U.S. views as undermining efforts to counter Russia’s actions in Ukraine. The additional tariff is set to take effect on August 27, 2025, providing a 21-day window for potential negotiations.

Key Details To Consider

The tariffs reflect Trump’s strategy to use trade measures as leverage against countries trading with Russia, though critics, including Indian officials, argue the approach is inconsistent given the U.S. and EU’s own trade with Russia. The effects of US tariffs on India is quite significant by all its means.

1. Reason For Tariffs

The tariffs target India for directly or indirectly importing Russian oil, which the U.S. claims supports Russia’s economy and its aggression in Ukraine. Trump’s executive order cites the national emergency declared in Executive Order 14066 (March 8, 2022) concerning Russia’s actions in Ukraine. The effects of US Tariffs On India are quite huge.

2. Effective Dates

The initial 25% tariff took effect on August 7, 2025, while the additional 25% will apply from August 27, 2025. Goods in transit before August 27 and cleared by U.S. customs before September 17, 2025, are exempt. The effects of US tariffs on India are considerably quite higher.

3. Exemptions

Certain sectors are exempt, including pharmaceuticals, active pharmaceutical ingredients, energy products (e.g., crude oil, natural gas), critical minerals, and electronics like semiconductors, computers, and smartphones.

4. Impacted Sectors

Non-exempt sectors facing significant impact include textiles, gems and jewelry, shrimp, leather, footwear, chemicals, automobiles, and machinery. For example, organic chemicals face a 54% duty, apparel up to 63.9%, and diamonds/gold products 52.1%. These sectors account for billions in exports, with $10 billion in diamonds/gold and $7.7 billion in machinery in FY25.

5. Economic Impact

The tariffs are expected to make Indian goods 30-35% less competitive compared to countries with lower tariffs (e.g., Vietnam at 20%, China at 30%). Estimates suggest a potential 40-50% reduction in India’s $86.5 billion annual exports to the U.S., affecting 55% of shipments, particularly for MSMEs with thin margins. This could lead to $3–5 billion in cost escalation for U.S. importers, $12 billion in lost U.S. corporate sales, and a 0.4% U.S. inflation spike, alongside impacting 2 million Indian jobs.

Overview Of US- INDIA Trade Relations

The trade relationship between the United States and India is a cornerstone of their strategic partnership, characterized by significant growth, mutual economic interests, and periodic tensions over tariffs and market access. This overview draws on recent data and developments, including the impact of tariffs announced in 2025, to provide a concise summary of the current state of bilateral trade.

Key Trade Figures

1. Total Trade Volume:

In 2024-25, bilateral trade in goods and services reached approximately $212 billion, making the U.S. India’s largest trading partner for the fourth consecutive year. This includes $131.84 billion in goods trade and a significant services component.

2. India’s Exports to the U.S.:

In FY24, India exported $77.5 billion in goods to the U.S., including engineering goods ($17.6 billion), electronic goods ($10 billion), gems and jewelry ($9.9 billion), pharmaceuticals ($8.72 billion), and petroleum products ($5.83 billion). Services exports, particularly from IT and software, are also substantial, with India maintaining a strong foothold in U.S. markets.

3. U.S. Exports to India:

U.S. exports to India in FY24 totaled $40.7 billion, with major categories including mineral fuels and oils ($12.9 billion), pearls and semi-precious stones ($5.16 billion), nuclear reactors and machinery ($3.75 billion), and electrical machinery ($2.38 billion).

4. Trade Surplus:

India maintains a trade surplus with the U.S., estimated at $36.8 billion in FY24, driven by higher exports. However, U.S. data suggests a $41 billion deficit for the U.S. in 2024-25.

5. Foreign Direct Investment (FDI):

The U.S. is India’s third-largest source of FDI, with cumulative inflows of $67.76 billion from April 2000 to September 2024. U.S. FDI in India was $6.04 billion in FY23, supporting sectors like IT, pharmaceuticals, and industrial equipment. Indian FDI in the U.S. reached $14.4 billion by 2021, sustaining over 72,000 U.S. jobs.

In this chart you will get the idea how India’s exports can get impacted due to the increased tariff of the US in 2025.

US Tariffs Implementation Dates On Indian Goods

50% Tariffs Structure On Indian Goods

As of August 12, 2025, the U.S. has implemented a multi-layered tariff structure on Indian imports, culminating in a total of 50% for most non-exempt goods. This structure is designed to address perceived trade imbalances and India’s continued purchases of Russian oil. The tariffs are applied additively and are justified under U.S. trade laws like Section 232 (national security) and Section 301 (unfair trade practices). Below is a detailed breakdown based on current announcements.

Tariff Components And Breakdown

The 50% total tariff is not a flat rate but a combination of baseline, reciprocal, and additional duties:

• Baseline Tariff (10%): Applied to all U.S. imports, including from India, as part of broader trade policy. This serves as the foundational layer.
• Reciprocal Tariff (15%): Country-specific adjustment for India, bringing the initial effective rate to 25% (10% baseline + 15% reciprocal). This was introduced to mirror perceived high Indian tariffs on U.S. goods.
• Additional Penalty Tariff (25%): Imposed specifically due to India’s Russian oil imports, elevating the total to 50% for affected goods.

The structure can vary slightly by product due to existing anti-dumping or countervailing duties, potentially pushing rates higher (e.g., up to 58.26% for some marine products).

Effective Dates

• April 5, 2025: Baseline 10% tariff takes effect on all imports.
• August 1, 2025: Initial 25% tariff (10% baseline + 15% reciprocal) becomes effective for Indian goods.
• August 27, 2025: Additional 25% penalty tariff takes effect, resulting in 50% total (scheduled; provides a 21-day negotiation window from August 6 announcement).
• Grace Period: Goods loaded onto ships before August 7, 2025, and arriving in the U.S. before October 5, 2025, are subject only to the initial 25% rate.

List Of Indian Goods That Can Get Impacted By US Tariffs Rate

The Tariff has affected various Indian Goods that can impact our daily lifestyle. So, let’s explore the goods where tariffs impact drastically.

Economic Impact Of Tariffs In India

The tariffs are projected to have a moderate but notable effect on India’s economy, given its low export reliance (21% of GDP) compared to peers like China or Vietnam. Key estimates include:

1. GDP Reduction:

Analysts forecast a slowdown of 0.2-0.8 percentage points in growth if tariffs persist. Moody’s specifically warns of a 0.3 percentage point hit, potentially lowering FY26 growth from 6.3% to around 6%. Goldman Sachs echoes a 0.3% shave-off. Other sources peg the impact at 0.2% of GDP, reflecting the limited exposure of US-bound goods exports (2.3% of GDP).

2. Export Losses:

Around 55% of India’s merchandise exports to the US ($47-48 billion) are affected, with vulnerable volumes estimated at $8 billion. Nomura describes it as akin to a “trade embargo,” making many products unviable. Specific hits include $2 billion in shrimp exports.

3. Job Losses And Broader Effects:

Labor-intensive industries could see significant layoffs, particularly in MSMEs and regions like Gujarat (a jewellery hub), where orders have dropped and gold prices surged. No precise job figures are available, but millions in textiles and gems are at risk.

Indirect effects include higher import costs for US-dependent supply chains (e.g., Boeing parts, where India is both supplier and buyer), straining fiscal balances.

Banks are scrutinizing exporters’ US exposure for loans, potentially curbing credit. Public sentiment on X shows fears of downturns but emphasizes resilience via services (45% of exports, largely untouched).

Stock Market Reaction To Tariffs Announcement

The high tariff imposition by the US on India was an eye opener for stock market players. But thanks to the timely reaction of the Indian government the damage was less as compared to other countries of the world.

1. Hardest Hit:

Textiles, apparel, gems & jewellery, auto parts (down 4-10%); Nifty Export Index fell 6.5% since late July. Garment stocks and midcap pharma slid amid margin concerns. You must know the effect of US Tariffs on India before making investments in the Stock market.

2. Resilient/Exempt:

IT (e.g., Infosys, Wipro minimally down), pharmaceuticals (generics largely spared), financials, and consumer durables. These are recommended for “crisis-proof” portfolios.

3. Broader Effects:

Potential job losses in export hubs, rupee slide boosting non-US exports but raising import costs. Moody’s and others warn of 0.2-1% GDP shave-off, slowing manufacturing push.

India’s Strategic Response To US Tariffs

On several fronts the Indian Government has taken some decisive actions and decisions to combat this situation. Now some of the core effects of US tariffs on India are as follows:-

1. Diplomatic & Negotiation Efforts

• Ongoing Bilateral Talks: A US delegation is in Delhi for negotiations, with India pushing for exemptions in sectors like textiles and gems. Trump has expressed openness but scrapped a prior deal, citing India’s stance. Experts like Raghuram Rajan criticize it as “gun to your head” tactics.
• WTO Challenge: India plans to file a complaint at the World Trade Organization, arguing the tariffs violate fair trade rules.
• Geopolitical Messaging: Defense Minister Rajnath Singh warned of “global forces” unhappy with India’s growth, seen as a veiled jab at the US. Modi responded firmly, asserting sovereignty. India’s refusal to cut Russian ties or exit BRICS underscores strategic autonomy.
• Shifting Alliances: Modi’s first China visit in seven years and BRICS engagement signal a pivot toward multipolarity, countering US pressure. Nobel laureate Abhijit Banerjee suggests reconsidering Russian oil if discounts shrink, but only via negotiations

2. Economic Diversification

To reduce US dependency (18% of exports), India is accelerating trade shifts and bolstering internal resilience.

• Four-Pronged Plan: Outlined by the government to blunt impact:
  1. Diversify export markets (e.g., EU, UK, ASEAN via FTAs).
  2. Modify export basket toward high-value goods.
  3. Boost domestic demand through reforms.
  4. Ease business regulations for competitiveness.
• Subsidies and Incentives: Industry demands direct subsidies; government considering hikes in RoDTEP (Remission of Duties and Taxes on Exported Products), cheaper credit, and PLI expansions for MSMEs in textiles, engineering, and agri. RBI may cut rates, GOI reduce taxes, and increase spending on defense/infra.
• Self-Reliance Push: Accelerate “Make in India,” block Chinese dumping, and indigenize defense (e.g., buy from Russia, France, Israel). Fast-track FTAs with EU/UK to offset losses.

3. Retaliatory And Assertive Measures

While avoiding full escalation, India has taken targeted steps to signal resolve.

• Pausing Defense Deals: Suspended purchases of US arms like Stryker vehicles, Javelin missiles, and Boeing planes; canceled Defense Minister’s Washington visit. This responds to US pressure while offering to reduce Russian oil for concessions.
• Boycotts and Public Campaigns: Outrage led to calls for boycotting US brands (e.g., McDonald’s, tech platforms), fueled by RSS affiliate Swadeshi Jagran Manch’s “Videshi Companies Bharat Choro” protests. Corporate leaders promote local alternatives.
• Potential Tariffs and Regulations: Considering 50% reciprocal tariffs on US products (e.g., steel, aluminum). Suggestions include tightening audits on US firms, digital taxes, data localization, and export surcharges. Go after US Big Tech with restrictions.

Geopolitical Tensions Due To Tariffs Imposition In India

India’s imposition of tariffs—and more significantly, its response to tariffs imposed by other nations, particularly the United States—has triggered a wave of geopolitical tensions that are reshaping its foreign policy landscape. Here’s a structured breakdown of the situation:

1. India–US Trade Tensions

• Tariff Escalation: President Trump imposed a 50% tariff on Indian exports, citing India’s trade with Russia and its own high tariff barriers.
• Economic Fallout: Indian sectors like textiles and pharmaceuticals, heavily reliant on US markets, are facing major setbacks. The Sensex and Nifty dropped sharply following the announcement.
• Strategic Strain: Despite earlier cooperation in defense and technology, the tariff move signals a downturn in bilateral relations.

2. India’s Retaliatory Diplomacy

• Diversifying Alliances: India is re-engaging with China, Russia, and Brazil. Modi’s outreach to Putin and Lula da Silva, and the revival of the Russia-India-China (RIC) format, reflect a pivot away from sole reliance on the US4.
• BRICS Solidarity: India is aligning with Brazil’s call for a joint BRICS response to US tariffs, emphasizing multilateral resistance over bilateral concessions.

3. Domestic Political Calculations

• Agricultural Sensitivities: India has refused US demands to open its agricultural and dairy sectors, citing food security and religious concerns.
• Public Sentiment: Modi is wary of domestic backlash if perceived as yielding to US pressure, especially with elections looming

Final Words

Hence, these are some of the core effects of US tariffs on India that you need to be well aware of. Without knowing the facts well you cannot reach any kind of conclusion from your end. Identify the best solutions that can make things happen in your way.

You can share your views and opinions in our comment box. This will help us to know your take on this matter. So in both ends there is risk India and US markets can crash anytime if this situation escalate further.

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ICA Edu Skills Team

Working with businesses in diverse industries. I'm passionate about helping others understand and manage their finances effectively. This blog is where I share practical tips, insightful guides, and the latest updates on accounting, taxation, GST, TallyPrime, and advanced Excel. Feel free to ask questions, leave comments.

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