News / Indian exporters hope for US trade deal after 25% tariff blow

© Awargula |

Indian exports to the US face a 25% tariff – along with other penalty shocks – from 1 August, threatening to redefine the much-hyped trade diversification playbook in Asian supply chain dynamics.

The cumulative level could surpass China’s 30% tariffs, while its manufacturing rival, Vietnam, remains at 20%.

The US president, on social media, cited two factors for the heavy tariff against India: unbalanced trade that heavily favours New Delhi; and its expanding energy and military equipment imports from Russia, despite western sanctions linked to the Ukraine invasion.

Industry sources in India believe the long-term impact of these tariffs will result in a bilateral trade deal both sides had been negotiating for some time.

Meanwhile, the Indian government responded yesterday that it was “studying the implications” of the updated US tariffs, the Ministry of Commerce & Industry adding: “We remain committed to that objective [of signing a trade deal].

“The government will take all steps necessary to secure our national interest, as has been the case with other trade agreements including the latest comprehensive economic and trade agreement with the UK.”

The US negotiations are said to have hit stalemate because of New Delhi’s non-negotiable stance on protecting the country’s agricultural and dairy markets.

Two-way trade between India and the US has gained a healthy pace in recent years – India exported some $86.5bn worth of goods in fiscal year 2024-25, up 12%, with US imports at some $45.3bn, up 7% year on year. The US market is critical for India, due to that wide trade surplus.

Indian exports to the US mainly comprise pharmaceuticals, electronics, gems and jewellery, automobiles, steel, and ready-made garments, while India’s imports from the US are led by crude oil and other petroleum products, according to industry data.

Electronics or hi-tech industry verticals have now become a major play for India’s ‘Make-in-India’ programme, with smartphone contract makers for Apple, particularly Taiwan’s Foxconn and South Korea’s Samsung. It is here where Vietnam, with its 20% tariffs, could challenge India’s growth ambitions.

Ajay Sahai, director general and CEO at the Federation of Indian Export Organisations (FIEO), told The Loadstar: “The US decision to impose a 25% tariff, coupled with an undefined penalty related to India’s oil and defence engagements with Russia, has added a fresh layer of uncertainty for businesses on both sides.

“That said, with the India-US bilateral trade agreement gaining traction, the industry remains cautiously hopeful.”

Some sources believe the tariff blow could cost India something close to $4bn in export value, although it is an early forecast.

On the garment trade front, the Indian industry is still on a stronger footing than its nearest Asian rival, Bangladesh, which is facing 35% US tariffs, but how the threat of additional penalties will play out remains to be seen.

“The tariff of 25% is higher than what we expected, but we should not be overly worried as long as Vietnam and Bangladesh tariffs are not revised downwards,” said Sudhir Sekhri, chairman of India’s Apparel Export Promotion Council.

“The penalty is a grey area and we hope the government of India will negotiate this with the US.”