The U.S. President Donald Trump has announced a 25% tariff with additional penalties on Indian exports, citing India’s ties with Russia and high trade barriers, marking a further dip in India-U.S. trade relations.

India–US Trade Overview

• Top Trade Partner: The US was India’s largest trading partner (2021–25), with $186 billion bilateral trade in 2024–25.
• Trade Surplus: India exported $86.5B, imported $45.3B, resulting in a $41B trade surplus.
  • It was $35.32 billion in 2023-24 and $27.7 billion in 2022-23.
• Services Trade: India also maintained a $3.2B surplus in services.
• Key Traded Products
  • India’s Exports: Drug formulations, telecom equipment, petroleum products, textiles, gems & jewellery, auto components.
  • India’s Imports: Crude oil, coal, petroleum products, machinery, aircraft parts, gold.

Impact on Indian Exports

• Cost Increase: Higher tariffs will make Indian goods costlier and less competitive in the US market.
• Affected Sectors: Labour-intensive industries like pharma,  textiles, leather, footwear, gems, handicrafts may suffer most.
• Competitor Comparison: India faces 25–38% duty, while competitors like Vietnam (20%), Bangladesh (35%), and Thailand (36%) may still undercut Indian goods.

Reasons for Tariff Impositions by the US

• Trade Deficit Argument: The US cites a large trade deficit with India and claims India imposes high tariffs on American goods, restricting US exports.
• Geopolitical Pressure: India’s energy and defense ties with Russia have also triggered US dissatisfaction.
• Trade Imbalance: US aims to reduce its trade deficit with India; negotiations have seen limited breakthroughs.
• High Indian Tariffs: Persistent US complaint over India’s tariff structure and non-tariff barriers.

India’s Response 

• The Commerce Ministry stated that India is assessing the impact of the U.S. decision and remains committed to pursuing a fair, balanced, and mutually beneficial trade agreement.
• It assured that the government will take all necessary steps to safeguard the country’s national interests.

Broader Implications for Global Trade of US Tariffs

• Uncertainty in Trade Flows: Blanket tariffs disrupt established supply chains, affecting sourcing and investment decisions globally.
• Shifting of Export Hubs: Tariff hikes may incentivize firms to shift operations from affected nations to lower-tariff countries.
• Impact on Multilateralism: Undermines WTO norms, promoting unilateral trade actions and retaliation cycles.
• Reduced Global Trade Volume: Higher tariffs can lead to global trade contraction, affecting growth in export-reliant economies.
• Volatile Markets: Tariff announcements impact currency values, stock indices, and global commodity pricing.

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