America Imposes 25% Tariff on India

America Imposes 25% Tariff on India

Why in News America Imposes 25% Tariff on India? 

Recently, the United States imposed a 25% tariff on several Indian goods. This decision came amid growing trade tensions between the two countries. The move reflects changing global trade dynamics and rising protectionist policies.

Key Highlights of the Tariff Announcement

• The U.S. government announced the 25 % tariff on Indian imports on July 30, 2025. American officials set the duty rate at a flat 25 percent on a broad set of goods. The measure will become effective on August 1, 2025.
• The administration cited India’s high tariffs on U.S. exports as unfair trade practice. They also flagged India’s trade with Russia in energy and defence goods amid the Ukraine war. These reasons formed the justification for the tariff and an unspecified penalty.
• These tariffs stem from broader U.S. policy under the “Liberation Day” tariff regime initiated on April 2, 2025. Executive Order 14257 imposed baseline tariffs of 10 percent and higher reciprocal duties.
• The U.S. already imposed 25 percent duties on steel and aluminium earlier in 2025 affecting Indian shipments.
• Indian government notified WTO of plans to retaliate with about $725 million in tariffs on selected American products. 
• India also considered targeted reductions of its own import duties on non‑sensitive U.S. goods while resisting pressure to open key sectors like agriculture. 

Also Read: India‑US Trade Deal Regarding GM Crops

Goods and Sectors Affected by the 25 % Tariff

• Textiles and Apparel: India’s textile and apparel producers now face a tough export environment. The 25% tariff may eliminate their price advantage against regional competitors like Vietnam and Bangladesh. Home textiles, garments, and footwear are some of the core products at risk. The Confederation of Indian Textile Industry warned that this tariff would test the sector’s resilience at all levels.

• Automobile Components: India exports a wide range of auto parts to global markets, with the U.S. being a significant buyer. Tariffs will likely push up prices for these components. This will impact both small suppliers and Tier-1 manufacturers. The cost hikes could reduce demand from U.S. carmakers and result in order cancellations. India exported more than $2.2 billion worth of auto components to the U.S. in 2024. Workers in this export-driven sector could also face temporary layoffs or reduced wages.

• Gems and Jewellery: The 25% tariff announced by the U.S. directly hits India’s gems and jewellery sector. This industry contributes over $10 billion annually to Indian exports to the U.S. The increased duty will inflate product costs and slow down shipments. The Gem and Jewellery Export Promotion Council expressed serious concern. They warned that rising tariffs will squeeze profit margins across the value chain. 

• Electronics: India has grown as a smartphone exporter, especially for Apple’s supply chain. After recent shifts, India overtook China in U.S. iPhone supply volume. Apple had begun assembling iPhones in India to avoid Chinese tariffs. That shift helped India gain relevance in global electronics trade. A higher tax could slow India’s progress as a manufacturing hub under the “Make in India” initiative. 

• • Pharmaceuticals: India remains the world’s largest supplier of generic drugs to the United States. Annually, the U.S. imports nearly $8 billion worth of Indian pharmaceuticals. In 2022, Indian drugmakers accounted for 40% of prescriptions filled in the U.S. Indian generics helped the American healthcare system save nearly $220 billion in 2022 alone. A 25% tariff could not only raise medicine costs in the U.S. but also damage India’s export momentum in this key segment.

• Chemical Industry: The chemical industry plays a vital role in India’s export economy. Products like dyes, solvents, and specialty chemicals ship to American industries. A 25% tariff can make Indian goods less attractive compared to Chinese or European suppliers. Similarly, the capital goods sector could lose orders in engineering components and machinery. Many companies might need to explore new markets to manage the setback.

Also Read: Reciprocal Tariff: Definition, History and Benefits

State-Wise Impact on Indian Exports

• Gujarat: Gujarat contributed nearly 30.7% to India’s total merchandise exports during the financial year 2023–24. Gujarat led in sectors such as chemicals, petrochemicals, textiles, gems, jewellery, engineering goods, and pharmaceuticals. The state may face weaker orders from U.S. buyers. Exporters from its pharmaceutical hubs could lose competitive edge. The state supply chains may suffer delay and demand drop.

• Maharashtra: Maharashtra held about 15.37 % of Indian exports in FY 2023‑24. It focuses heavily on engineering goods and pharmaceuticals. Engineering products destined for U.S. may face steep customs costs. Machinery and auto components may lose price advantage. Major cities such as Mumbai and Pune may see reduced factory output. 

• Tamil Nadu: Tamil Nadu contributed around 9.3 % of India’s export value in FY 2022‑23. The state leads in leather goods production valued over $3.3 billion. Now the new tariffs may raise costs on leather shipments to the U.S. Footwear and garment makers may lose contracts. 

• Karnataka: Karnataka exported over $14 billion worth of goods in FY 2023‑24. It is strong in electronics, engineering goods, and pharmaceuticals. Silicon Valley of India and pharma parks may see lower export volumes. Bengaluru‑based firms could experience slower growth and search new markets.

• West Bengal: West Bengal generated close to $11.7 billion from merchandise exports in FY 2023–24, with major items including engineering products, leather goods, gems and jewellery, marine items, and chemicals. The ceramic and chemical firms in the state may face slowed orders and pricing stress.

• Rajasthan: Rajasthan achieved goods exports worth approximately $9.7 billion during FY 2023–24. The state focuses on gems, jewellery, and textiles. Labour-intensive sectors employ millions in the state. The 25 % tariff may erode price competitiveness. State‑based firms may turn to Europe or Middle East to compensate.

• Uttar Pradesh: Uttar Pradesh recorded around $20.6 billion in goods exports during the financial year 2023–24. Moradabad alone exports more than 40 % of India’s brass handicrafts. The tariff may lift prices on metal handicraft exports. Buyers in U.S. may cancel orders, because of this more than 30,000 small manufacturers may suffer. 

Also Read: U.S.-China Trade Agreement 2025

India’s Strategic Moves to Tackle This 

• India plans to push for a Bilateral Trade Agreement with the U.S. The agreement aims to lower tariff barriers and expand market access. Negotiations may conclude by September or October 2025. 
• India boosts ties with markets in Europe, the Middle East, and Southeast Asia. 
• India has already entered into a trade agreement with the United Kingdom and is currently in the process of negotiating similar pacts with the European Union and the United Arab Emirates. 
• All hese moves aim to reduce reliance on the U.S. market and soften impact of tariffs.
• India participates in initiatives like the Supply Chain Resilience Initiative with Japan and Australia. It also works on the India–Middle East–Europe Economic Corridor project. These projects aim to shorten trade routes and build supply resilience.
• India’s 2025‑26 Budget prioritizes exports as a core growth driver. It supports MSMEs through reforms in trade finance and cross‑border factoring. India also announced duty exemptions on EV‑battery parts and mobile phone components.
• Global firms are shifting away from China under a “China+1” supply‑chain approach. India increases outreach to attract investment across manufacturing sectors. It positions itself as a stable partner amid global trade turbulence.