The Donald Trump administration has imposed a 25 per cent tariff on Indian merchandise exports to the US, making India one of the highest duty-paying nations in South Asia and globally.
Notably, the executive orders issued by the White House on Thursday evening (Friday morning in India) did not mention any penalties for India’s Russian oil and defence purchases — the other threat Trump had issued.
The new reciprocal tariff regime will take effect on October 5, after which Indian goods arriving at US ports will face the new duty unless New Delhi secures a bilateral trade agreement by then.
Currently, Indian merchandise goods face a flat 10 per cent tariff in addition to the existing Most Favoured Nation duty that predated Trump’s return to the White House.
To benefit from the October deadline, goods must be loaded onto vessels by August 7.
India’s neighbours face lower tariffs: Bangladesh, Sri Lanka, Taiwan and Vietnam will pay 20 per cent while Cambodia, Indonesia, Malaysia, Pakistan, the Philippines and Thailand are subject to 19 per cent tariffs.
The steep tariff on India will significantly affect sectors that employ millions of workers, including textiles, footwear, gems and jewellery, marine products and
leather goods.
“The impact will be huge. We are placed unfavourably with higher duties against most competing economies, who will have an edge over India,” said Ajay Sahai, director-general of the Federation of Indian Exports Organisation.
He said the gems and jewellery sector would be particularly affected because of the high transaction values.
Several sectors remain exempt from the reciprocal tariff for now, including oil and petroleum products, finished pharmaceuticals and active pharmaceutical ingredients, smartphones and electronic products.
Ajay Srivastava, founder of the economic think tank Global Trade Research Initiative, confirmed that these exemptions would continue for now.
Steel and aluminium face separate 50 per cent sectoral tariffs and are not part of the reciprocal tariff structure.
While currently exempted, the oil and pharmaceutical sectors might face scrutiny later. If India continues purchasing Russian oil, these segments could attract punitive action, as Trump previously warned. The President has also threatened pharmaceutical tariffs, though a committee is still reviewing this matter.
China deadline
China faces an August 12 deadline to reach a durable tariff agreement with Trump’s administration, a Reuters report said.
A US official told reporters the two countries were making progress towards a deal.
The European Union struck an agreement on a blanket 15 per cent tariff with the US at the end of July, Reuters added.
The bloc’s trade chief, Maros Sefcovic, said the framework deal the EU had signed with the US gave EU exporters a “more competitive position”.
“This reinforces stability for businesses as well as trust in the transatlantic economy,” Sefcovic said.
US team
A US delegation is expected to visit New Delhi later this month.
Commerce minister Piyush Goyal had announced on Thursday that India and the US had held five rounds of talks. He had pledged that India would take “all necessary steps to secure and advance national interest” while protecting farmers and small businesses.
An Indian foreign ministry statement on Friday said: “We remain focused on the substantive agenda that our two countries have committed to and are confident that the relationship will continue to move forward.”
Trade talks between Washington and New Delhi have stalled over India’s resistance to opening its heavily protected agriculture and dairy sectors to US firms. Sources quoted by PTI confirmed that India had ruled out opening the agricultural, dairy and animal feed sectors despite Trump’s punitive tariffs.
Sources said that nearly $40 billion worth of exports from India — the world’s fifth-largest economy — could be impacted by Trump’s tariff measures.