India-US trade: Donald Trump slaps 25% tariffs, penalty on Indian exports to US

Time of India

6 days ago

US President
on Wednesday announced sweeping new trade restrictions on India, imposing a 25 per cent tariff on all Indian imports starting August 1. Along with the tariff, an additional penalty has been declared, targeting India's recent defence and energy purchases from Russia.
Tired of too many ads? go ad free now
The announcement, made via Truth Social, said India maintained 'the most strenuous and obnoxious' trade barriers and purchased 'significant' military and energy supplies from Russia despite the Ukraine conflict.
The move comes just weeks before a US trade delegation is scheduled to visit India for the sixth round of talks aimed at finalising a bilateral trade deal. Trump's declaration is now being widely viewed as a pressure tactic.
India hasissued a statement saying it is 'studying the implications' of Trump's move and remains 'committed to concluding a fair, balanced and mutually beneficial bilateral trade agreement.' Officials also emphasised that India would take 'all steps necessary to secure our national interest,' especially for sectors like agriculture, MSMEs, and exports.
Here are the views of the experts on the issue:
Madhavi Arora, economist at Emkay Global, highlighted the broader geopolitical angle, stating, 'While the negotiations seem to have broken down, we don't think the trade deal haggling between the two nations is over yet.
We see it more from the lens of geopolitics than purely economics and see both sides striving to get the deal done, even as the power equations may change a bit in US favour.'
Meanwhile, Agneshwar Sen, trade policy leader at EY India, noted the continuation of talks despite the tariff announcement. 'The decision to raise the US tariff to 25 per cent on Indian exports is an unfortunate development, particularly given the strong strategic partnership that has been steadily built between India and the USA in recent years.
Tired of too many ads? go ad free now
However, it's important to note that both countries remain positively engaged in active negotiations with the US team expected in India later in August to finalise a comprehensive trade agreement.
'
Garima Kapoor of Elara Securities also maintained a cautiously optimistic stance, saying, 'Overall, we continue to see a deal by the end of Q3 but a kneejerk reaction in Indian asset classes is likely in the near term.'
Ranen Banerjee of PwC India focused on India's relative tariff burden, observing, 'Higher tariffs for India compared to countries it competes with, for exports to the US, are going to be challenging. However, the expectation is that the trade deal is likely to be finalised shortly and hence the period of applicability of these higher tariffs could be short.'
Sakshi Gupta, principal economist at HDFC Bank, pointed to potential currency market volatility.
'For now, the announcement of 25 per cent tariffs is likely to cause volatility in the FX market with mounting depreciation pressure on the rupee. Although the RBI is likely to intervene tomorrow to tamp down the depreciation pressure.'
Aditi Nayar, chief economist at ICRA, warned of GDP implications. 'When the US had initially imposed tariffs, we had lowered our forecast of India's GDP expansion to 6.2 per cent for FY2026, presuming a tepid rise in exports and a delay in private capex.
The tariff (and penalty) now proposed by the US is higher than what we had anticipated, and is therefore likely to pose a headwind to India's GDP growth. The extent of the downside will depend on the size of the penalties imposed.
'
From a trade industry perspective, Kirit Bhansali of the Gem and Jewellery Export Promotion Council said, 'This is a deeply concerning development. The Indian gem and jewellery sector, in particular, stands to be severely impacted.
The United States is our single largest market, accounting for over $10 billion in exports - nearly 30 per cent of our industry's total global trade. A blanket tariff of this magnitude will place immense pressure on every part of the value chain.
We recognise the need to address trade imbalances, but such extreme measures undermine decades of economic cooperation. We urge the US administration to reconsider, and call on both governments to engage in constructive dialogue that safeguards bilateral trade and protects the millions of jobs that depend on it on both sides.'
N Thirukkumaran of the Tiruppur Exporters' Association saw this as part of a bargaining game. 'It is just a negotiation tactic. Trade negotiations are ongoing. The Indian government is tough on certain terms like agriculture and dairy — India isn't opening up. If it goes through, US exports from the association will be affected, because Vietnam has lower tariffs. We will be losing our competitive edge. We are optimistic that an imminent trade agreement will be on the lines of the one with the UK.
We have to wait and watch, and not panic. There is no reason to panic.'
Nilesh Shah, MD of Kotak Mahindra AMC, emphasised policy response and market hopes. 'Despite the unpredictable policy making of the US, the market was expecting a tariff deal to work out as longer-term US-India strategic interests are aligned. Markets will hope for a 'TACO' trade if better senses prevail. China is defying US/UN sanctions on Iran oil, Myanmar and Russia trade and North Korea support.
Size and the competitiveness of the economy have their advantages.
I hope and pray that this unilateral imposition should accelerate Indian policy-making to be growth-supportive. Our biggest deterrence continues to remain GDP size and competitiveness.'
Rahul Mehta of the Clothing Manufacturers Association of India shared concerns about competitiveness. 'Having seen the several about turns on the tariff front in the case of other countries, I would not press panic buttons right now.
But, if the proposed terms do come into effect, it will make our products 7 per cent to 10 per cent more expensive than some of our competitors, and it will certainly hurt our apparel exports to the US Fortunately, this set-back has come at the time when we have just signed an FTA with UK, and are proceeding rapidly with an FTA with EU.
'
SC Ralhan of the Federation of Indian Export Organisations added, 'This is a major setback for Indian exporters, especially in sectors like textiles, footwear, and furniture, as the 25 per cent tariff will render them uncompetitive in the US market against rivals from Vietnam, China, and elsewhere.
However, we remain hopeful that both countries will work towards a bilateral trade agreement.'
Colin Shah of Kama Jewellery also underlined the blow to export-heavy sectors. '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. Going ahead, we expect trade activities to remain muted with US However, we also need to wait and watch how the situation unfolds.'
Ashok Chandak of the India Electronics & Semiconductor Association pointed to a broader shift needed in India's strategy. 'The imposition of a 25 per cent tariff by the US on Indian goods will be short-term. Indian electronics exports is a short-term challenge that could disrupt supply chains and dent price competitiveness. India does not have any major advantage compared to other Asian countries anymore if a 25 per cent tariff above the baseline 10 per cent is continued.
However, it also underlines the urgency for India's electronics sector to diversify export markets, deepen domestic markets, develop Indian brands and products, and move up the value chain to reduce dependency on price-sensitive, tariff-exposed exports.'
Avinash Gorakshakar of Profitmart Securities cautioned against speculation, noting, 'Until the final document is released, it's all speculation. India is a large, attractive market that the US cannot afford to ignore, so any move will ultimately be weighed against long-term interests.
My sense is that the August 1 deadline may itself be flexible, and India is unlikely to budge easily. In the short term, the announcement could trigger some selling pressure, but in the longer term, I expect the impact to neutralise.
India's market attractiveness remains intact.'
Harsha Vardhan Agarwal of FICCI struck a hopeful tone, saying, '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. The aim is to secure a beneficial pact rather than a hurried deal that gives short-term benefit but may result in adverse outcomes in the long term. It is also important to note that India offers a large market for US businesses and many of the large companies from the US benefit from leveraging the demand as well as the skills and talent pool that we have to offer.
'
(With inputs from Reuters)