Increased US tariffs are expected to exert a significant impact, ranging from 50% to 63.9%, on various Indian exported goods.
In a significant development, the United States has imposed reciprocal tariffs on Indian goods, reaching up to 50%, in response to ongoing trade negotiations and geopolitical concerns.
The tariffs, which came into effect on August 21, 2025, are a combination of a baseline 10% duty, a 25% reciprocal tariff announced on April 2, 2025, and an additional 25% tariff effective 21 days after August 7, 2025.
Several Indian sectors are affected by these high tariffs, including apparel and textiles, diamonds and gems, gold, machinery, and smartphones. Apparel, both knitted and woven, will face tariffs effectively totaling 50% and 60.3% respectively, leading to a potential increase in consumer prices in the U.S.
The tariffs on apparel are expected to raise prices by around 37% in the short run and keep them approximately 18% higher in the long term. Diamonds and gems, as well as gold, are also among the sectors affected by these high tariffs.
Machinery and smartphones fall under broader categories of manufactured goods, which are mostly subject to the 50% tariff unless specifically exempted. However, there are no distinct lower rates noted for smartphones.
There are exemptions for critical industries, such as pharmaceuticals, semiconductors, and energy resources, which do not face these tariffs and remain exempt.
The tariffs stem from U.S. concerns about trade imbalances, market access barriers in India, and geopolitical factors including India's imports of Russian oil and its membership in the BRICS group.
India and the U.S. initiated talks for a Bilateral Trade Agreement (BTA) in March 2025. The first stage of the BTA is aiming to be completed by October-November 2025. The negotiations are ongoing, with reservations from the Indian side on the U.S. demand for opening up the agricultural and dairy sectors.
The Commerce and Industry Minister, Piyush Goyal, has affirmed that the government is examining the impact of tariffs and will take all necessary steps to safeguard the national interest during the Monsoon session of Parliament. President Trump signed an executive order for reciprocal tariffs on various trade partners on April 2, 2025.
[1] Source: Office of the United States Trade Representative (USTR) [2] Source: The Economic Times [3] Source: The Hindu BusinessLine
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