India vs US Tariffs: Clash or Cooperation?
There are four types of principal tariffs – specific tariffs, compound tariffs, ad valorem (according to the value), and tariff-rate. The US specifically applied an ad valorem tariff on India, which is also called a customs duty.
Background of the tariff –
Since January, 2025 USA has started to take tariff action on some of its trading partners, including India. Donald Trump has imposed a 10% tariff on all countries, which was effective from April 5, 2025
On July 30, 2025, US President Donald Trump declared a 25% tariff on Indian goods, which has been effective from 1st August 2025. And further, an additional 25% tariff has also been applied on India.
US tariffs on some countries-
- Mexico- 25%
- Canada- 35%
- Ireland-15%
- India-50%
- Italy- 15%
- UK- 10%
- Switzerland- 39%
Reason behind tariff imposition-
The tariff is applied to protect US domestic industries like steel and aluminium as India exports more than the US imports. And also with an unspecified penalty for purchasing Russian crude oil.
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Major sectors affected-
1) Pharma – US govt. has threatened almost 200% tariff over a period of time. Though it will not be applicable at any time, as the US also depends on India for raw pharmaceutical products. But it can be real when it comes to the matter of generic drugs.
The US not only make drug prices higher but also leads to shortages in long-term drug innovation.
2) Textiles – About 28% textile products are exported from India to the US. Under the textile industries most affected sectors are home textiles, garments, and shoes. A price hike may lead to financial stress for businesses, as a effect of this, unemployment and job losses may happen.
Small and medium businesses in Kolkata, Ludhiana, Surat, Rajasthan will be hit badly because they heavily relied on the US market.
3) Gems and Jewellery – The Indian gems and jewellery export system and also the supply chain system would be disrupted due to the grow of the tariff.
4) Mineral-based industry – On two main minerals US has applied many tariffs that are steel (20%) and aluminium(10%).
It hits directly on profit margins. Indian companies either absorb the tariff cost or lose employees. The indian companies like SAIL, Tata Steel have to absorb the hike to hold their position in the world market.
5) Agricultural products– about 25% tariff imposed on agricultural products. This led to a fall in demand in the agricultural market and also had an impact on the farmers. Indian spices, packaged food and some traditional food items will face price disadvantages due to the tariff.
Impact on US-India trade relations-
The tariff on India created short-term challenges, especially in the export-based industry. For this India is trying to grow its exports in other countries like Europe, Africa to reduce US dependency.
Effect on Indian economic system-
Loss of GSP benefits has occurred and also it has an effect on employment. In the supply chain business, employees of different levels are engaged. So it has a huge effect on the economic system.
Benefit of US-
The US will make a growth of their economy through it. US farmers and workers will make a growth, and also US US-based economy will grow faster through this system.
India’s responses-
India is ready to pay a heavy price as India seeks to resist the whole matter. But following Trump’s decision, the relationship between New Delhi and Washington has deteriorated. India announced that it would like to increase trade with Russia.
In conclusion, it can be said that the deteriorated relations between the US and India can be improved in future. It can also start a new era in global trade as India is trying to expand its trade all over the world.
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