Trump Imposes 25% Tariff on Indian Products, Reigniting Trade Tensions — How Will It Impact Consumers and Businesses?

August 1, 2025 | New Delhi & Washington D.C.

Former United States President Donald Trump who is currently vying to retake his office has made a radical statement that has shocked world markets after announcing a blanket tariff on Indian imports by 25 percent with the tariff set to go into effect on August 1, 2025. This move is part of US wider protectionist policy which has much to do with Indian textiles, gems and jewellery, chemicals, auto parts industries.

What is going on, who is being impacted and what does the future hold in the ever-more convoluted economic relationship between the United States and India is brought down to the basics in this newsletter.

What Happened? The Executive Order Explained

President Trump signed another executive order on July 30, which slapped tariffs of 40+ countries and India was among the major recipients as it had to pay a general 25% tariff on most of their imports, in reference to its growing economic relations with Russia, especially in the energy and defense sectors.

The White House stated that the tariffs would help to restore fairness to the U.S. trade and penalise countries that violate American sanctions regime. Trump stated:

America is losing to its oil customers, India, who is purchasing oil and weapons on hostile regimes and satisfying the pockets of American consumers. That cannot be a fair trade. That is abuse.”

According to a statement, the officials of U.S Trade Representative stated that India refusing to join U.S sanctions against Russia is being a geopolitical provocation in the guise of an economic policy.

What Is Being Targeted?

According to customs and trade analysts, the tariffs will affect more than $86 billion worth of Indian exports to the U.S. These include:

• Textiles & Garments
• Gems & Jewellery
• Pharmaceutical Ingredients (partially exempt)
• Ceramics & Glass
• Chemical Compounds
• Auto Components
• Processed Foods & Tea

Indian Pharma, IT services, and renewable energy sectors may be partially or fully exempt, but the devil lies in the details—and many exporters still await clarity.

What’s the Impact on India?

In a report by the Global Trade Research Initiative (GTRI), it is estimated that the exports between India and the U.S. may decrease by 30 percent, which will cut the revenue more than by $25 billion just in the current fiscal year. This is going to be especially hard on labor-intensive sectors like garment and gem producing employing millions in the states of Gujarat, Tamil Nadu, Punjab and Maharashtra.

Textile Industry:

Virtually, U.S. receives an amount of almost twenty billion dollars of goods annually through India apparel and textile industry. Already, another 25 percent duty, which was unexpectedly imposed, is already forcing orders to be scrapped or re-routed to nations with low tariffs such as Vietnam and Bangladesh.

This will eliminate 40 percent of our U.S sales. We are already receiving calls of retailers calling to renegotiate on prices,”

–Tiruppur-based garment exporter CEO.

Gems & Jewellery:

This industry will be a victim in particular. The U.S. is the biggest buyer of the Indian diamond and gold jewellery and this can lead to up to 20,000 crore of lost business in Gujarats Surat as well as Zaveri Bazaar of Mumbai as order transfers.

How Is India Responding?

India is worried and is preparing to counter at the level of World Trade Organization (WTO) against what it describes as a move by Japan to cut a deal to reap maximum trade benefits.

Senior government officials told media that India is not yet thinking of retaliatory duties but is only looking at pursuing trade diplomacy at deeper levels and getting an interim trade agreement with U.S.

According to the Indian ambassador to Washington, 19 years ago:

The trade relations should not be weaponized We still have hope that this issue can be resolved through dialogue.”

Stock Markets React, Rupee Dips

Financial markets reacted swiftly to the news:

• The Nifty Textile Index fell over 6% in a single day.
• Major exporters like Welspun, Raymond, and Gokaldas Exports saw steep drops.
• The INR weakened to ₹87.60 per USD, nearing record lows.
• Mutual funds and FII holdings in export-oriented sectors saw outflows of nearly ₹4,000 crore.

Although the sudden decline was an alarming feeling, some experts believe that the impact may only be short-term and partly manageable.

The domestic market of India is also hard. However, this will compel the exporters to look broader than the U.S.,”

–Aditi Nayar, the Chief Economist at ICRA.

Geopolitics at Play: Russia in the Picture

Much of Trump’s rhetoric is tied not just to trade, but to India’s strategic relationship with Russia, especially its ongoing purchases of:

• Crude oil (at discounted prices)
• S-400 missile systems
• Military aircraft and hardware

According to the U.S. policy makers, such collaboration undermines the NATO and Western sanctions as a result of the Ukraine war. Some people even consider the tariffs as the proxy economic sanction and not a real correction in trade.

India, in its turn, claims that it preserves the strategic independence and will keep on consulting with both Russia and western countries, purchasing military goods.

A Trade Deal in the Works?

It is important to note that, despite the emotive language, Trump’s camp has mentioned that the deal can still be made regarding the trade agreement and the tariffs will only be temporary means of negotiation.

Reports from Washington suggest that U.S. negotiators are open to:

• Reducing tariffs to 10–15% if India agrees to open its markets to American dairy, agricultural, and medical device firms.
• A “mini trade deal” modelled on recent pacts with Indonesia and Taiwan.

Nonetheless, India is standing its ground, particularly on the importation of milk products, which is still a politically contentious issue because of the religious and cultural beliefs that exist.

The breakthrough can be achieved sooner than in September, when both countries are set to meet on the margins of the G20 Trade Ministers Summit.

What Should Exporters and Investors Do Now?

For Indian Businesses:

• Diversify Markets: Look beyond the U.S. to Europe, Middle East, ASEAN.
• Re-negotiate Contracts: Build tariff clauses into new deals.
• Cut Costs & Innovate: Automate, reduce overheads, increase value-add.

For Investors:

• Focus on domestic consumption sectors (FMCG, banking, infrastructure).
• Use this dip as an opportunity in quality export stocks after stabilisation.
• Monitor currency trends for hedging opportunities.

Conclusion: Trade Shock, But Not Collapse

The tariff action by Trump is no doubt a massive disturbance particularly to small and medium sized exporters who rely mainly on the American market. Nevertheless, the emerging domestic economy of India, its enhanced engagement with the European Union, UAE, and Southeast Asia, as well as its blistering potential of being considered as China+1 could serve as a critical cushion.

With India in its next chapter of its trade diplomacy there will be a great deal at stake as to how and what New Delhi will negotiate, not only negotiation with Washington, but also its own industries, to be able to protect jobs and respond to a more protectionist world order.