Trump’s Tariffs on India: On April 2, 2025, the Donald Trump administration imposed new tariffs worldwide and India was no exception to this broader policy of reciprocal tariffs meant to target the countries with which the US has significant trade deficits.
Here’s an overview of the immediate impacts on various sectors/aspects.
Trump’s Tariffs on India: Tariff Announcement
On April 2, 2025, the Trump’s administration imposed a 26–27% reciprocal tariff on the Indian Goods that are exported to the U.S., though such tariffs will come into effective from April 9, alongside a 10% baseline tariff for all countries. The move targets India citing its “non-reciprocal” trade practices, as India imposes high tariffs on U.S. goods since a long time (e.g., 70% on motorcycles vs. 2.4% U.S. tariffs) and this translates into a $46 billion trade deficit.
Tariff Details as Follows:
- Baseline Tariff: A 10% baseline tariff will be imposed on all imports coming from India, effective from April 5, 2025.
- Additional Tariff: An additional India-specific tariff of 17% will be applied come this April 9, 2025, bringing the total tariff on Indian goods to 27% on some of the sectors. Though it is slightly higher than the initially reported 26%.
- Exempted Sectors: Pharmaceuticals, semiconductors, energy products (oil, gas, coal, LNG), and copper are reportedly exempt from these new reciprocal tariffs that is being levied.
Trump’s Tariffs on India: Immediate Economic Impacts
Key Affected Industries: These industries are expected to be hit the most.
- Electronics: Roughly $14 billion annual exports (e.g., smartphones, components) to face higher costs, might lose market share to Vietnam and China.
- Gems/Jewelry: $8.5–9 billion sector (Surat hub) hit by 13.3% tariff gap, increasing the export cost, thus making it less attractive.
- Textiles: Tamil Nadu and Gujarat hubs face 6.59% tariffs, risks losing export orders to Bangladesh and Vietnam.
- Auto Parts: 25% U.S. auto tariffs threaten Tata Motors and Samvardhana Motherson.
Market Reactions:
- Indian Stock Market: Initial declines in Nifty and Sensex, even the global markets are bleeding red but recovery might be on the horizon due to lower tariffs compared to China (34%) and Vietnam (46%).
- Global Markets: Global markets, including Wall Street, experienced a significant plunge following the tariff announcement, indicating fears of a potential trade war and economic slowdown.
- Currency: Rupee stabilized (+0.08%) amid broader Asian currency dips.
- Export Loss Estimates: $7–33 billion annually projected to shrink the trade deficit for US with such tariffs, with chemicals, metals, and jewelry being most vulnerable.
- Impact on Trade: The newly imposed tariffs are expected to find Indian exporters in hot water, as it will make them look unfavorable to the US, particularly in key sectors like steel, textiles, electronics, and gems.
- Indian Government Response: The Indian government stated that “the Commerce Department is studying potential opportunities that may arise from the US tariff hikes”.
Exceptions: Pharmaceuticals ($9 billion exports) and energy products were exempted, sparing major firms like Sun Pharma.( Much Relief)
Trump’s Tariffs on India: Political and Diplomatic Responses
- India’s Strategy: Adopted a conciliatory tone, vowing to accelerate negotiations for a 2025 bilateral trade deal. Proposes to cut on tariffs valued at $23 billion of U.S. imports (e.g., bourbon, motorcycles) to secure relief and to increase trade between the two countries.
- U.S. Stance: Donald Trump praised PM Modi as a “great friend” but criticized India’s “protectionist” policies. Demanded reciprocity tariff until the trade deficit is resolved.
- Global Alignment: India may pivot towards EU and ASEAN trade blocs if talks stall.
- United States: The White House stated that India has tough and costly testing rules for products like chemicals, telecom equipment, and medical devices being imported to India which is hurting US businesses. They expect India to ease such rules and regulations that could boost trade between the two countries and allow US to export more products to India.
- India: The Congress president Mallikarjun Kharge criticized the tariffs, stating that “Despite the apparent friendship between the US and India, the US is acting like a businessman.”
- International Reactions: The Australian Prime Minister Anthony Albanese described the tariffs as having “no basis in logic” and not being “the act of a friend,” predicts such practices will increase uncertainty in the global economy and higher costs for American households.
Trump’s Tariffs on India: Geographical Hotspots
- Tamil Nadu & Gujarat: Textile and apparel hubs face job losses but may gain from competitors’ higher tariffs.
- Surat (Gujarat): Diamond and jewelry exports ($11.88 billion) at risk due to 13.3% tariffs.
- Karnataka & Telangana: Electronics manufacturing clusters (e.g., iPhone exports) under pressure but could attract diverted supply chains.
Trump’s Tariffs on India: Impact on the Common Man
- Prices: Immediate risks of rising prices of seafood (e.g., shrimp) and machinery imports, though pharmaceuticals and rice might remain stable.
- Employment: Textiles and auto parts sectors warn of layoffs amid trade war; IT sector faces huge indirect risks from uncertainty in the economy and the U.S. economy showing signs of economic slowdown.
- Currency Stability: Rupee resilience mitigates imported inflation for now.
- For the average Indian consumer, the immediate impact might be less direct. However, if Indian exports decrease significantly, it could eventually mean there will be job cuts on the rise especially in the affected sectors and potentially impact the overall economy. The extent of this impact can only measured by how Indian businesses and the government respond to such reciprocal tariffs.
Trump’s Tariffs on India: Early Beneficiaries
- Pharmaceuticals: Being exempted from tariffs, securing $9 billion exports and 30% U.S. generics market share.
- Textiles: Lower tariffs (27%) vs. Bangladesh (37%) and Vietnam (46%) may actually come in a disguise of a blessing, resulting in diverted orders from other nations.
- Domestic Steel/Aluminum: Exempt from additional tariffs, protecting Tata Steel and JSW.
Trump’s Tariffs on India: Negatively Impacted Sectors
- Steel: Already facing a 25% tariff prior to this announcement, the steel sector will likely to see being further impacted.
- Textiles: This is identified as a key sector that is slated to face challenges due to the new tariffs coming into effect.
- Auto Manufacturing: Similar to steel, this sector already had existing tariffs but with increased tariffs, it is likely to face even more tough challenge in the US auto market.
- Electronics and Gems: These are also highlighted as key Indian exports that will face a major hiccup.
Trump’s Tariffs on India: Conclusion
Although, the short term impact seems to be a bit concerning for the common man especially the Indian average consumer, India’s low export reliance on the U.S. (2.2% of GDP) and tariff exemptions for critical sectors provide resilience. Long-term gains still depends upon the trade deal negotiations and supply chain diversification.
A negative reaction in global markets, increased tariffs on key Indian exports, and diplomatic unease.
Also Read: “Trump’s Economic Tornado: How His Policies Could Reshape the Global Economy”
For deeper analysis, refer to Reuters, The Times of India, and The Hindu.