On Wednesday, President Donald Trump announced that the United States will implement a 25% tariff on goods imported from India, effective August 1.
India, recognised as the world’s fifth-largest economy, is set to encounter an undisclosed penalty on August 1, according to statements made by officials. However, details regarding the specific amount or the reasons behind the penalty remain unclear.
“Despite India’s status as a friend, our business dealings have been limited over the years due to their excessively high tariffs, which rank among the highest globally, as well as their stringent and cumbersome non-monetary trade barriers,” Trump stated in a post on Truth Social.
“A significant portion of their military equipment has consistently been sourced from Russia, making them one of Russia’s largest energy purchasers, alongside China. This occurs during a critical period when there is a widespread call for Russia to cease hostilities in Ukraine — a situation that raises numerous concerns.”
The commerce ministry of India, currently at the forefront of trade negotiations with the United States, has yet to respond to a request for comment.
Trump’s decision undermines aspirations for a constrained trade agreement between the two nations, which had been in negotiation for several months.
Trade negotiators from the United States and India have engaged in several rounds of discussions aimed at addressing contentious issues, with a particular focus on market access for American agricultural and dairy products.
Indian officials have shown reluctance to open the domestic market to imports of wheat, corn, rice, and genetically modified soybeans, despite advancements in specific sectors. They argue that such moves could jeopardise the livelihoods of millions of farmers across the country.
The recently announced tariffs are anticipated to affect India’s goods exports to the United States, projected to reach approximately $87 billion in 2024. This includes a range of labour-intensive products, such as garments, pharmaceuticals, gems and jewellery, as well as petrochemicals.
The trade deficit between the United States and India stands at $45.7 billion at present.
India has become the latest nation to encounter increased tariffs as a result of Trump’s “Liberation Day” trade policy, which seeks to redefine US trade relations by insisting on greater reciprocity.
The White House has issued a prior warning to India regarding its elevated average applied tariffs, which stand at nearly 39% for agricultural products. These rates escalate to 45% for vegetable oils and approach 50% for apples and maize.
The recent setback occurred in the context of previous assurances from Prime Minister Narendra Modi and former President Trump, who aimed to finalise the initial phase of a trade agreement by autumn 2025. They also sought to increase bilateral trade to $500 billion by 2030, a significant rise from the $191 billion recorded in 2024.
In 2024, US manufacturing exports to India are projected to reach approximately $42 billion. Additionally, energy exports, including liquefied natural gas, crude oil, and coal, may encounter retaliatory measures should India decide to respond similarly.
Indian officials have expressed their perspective on the United States, identifying it as a crucial strategic ally, especially in efforts to counterbalance China’s influence. However, there is a strong emphasis on the necessity to maintain policy flexibility regarding agriculture, data governance, and state subsidies.
