New Delhi, July 31 (KNN) In a significant development for bilateral trade, US President Donald Trump on Wednesday announced a 25 percent tariff on Indian exports, effective August 1, alongside an unspecified penalty related to India’s defence and energy ties with Russia.
The move could adversely impact India’s outbound shipments to the United States—its largest export market, which accounts for roughly 20 percent of total exports.
The announcement follows the failure of five rounds of negotiations between India and the US to conclude an interim trade agreement.
While terming the development as challenging, the Federation of Indian Micro and Small & Medium Enterprises (FISME), the national MSME body, is not unduly perturbed.
“MSME Exports will face increased challenges with the Trump Tariff of 25 percent. MSMEs account for the bulk of exports to the US with products such as Textiles and apparels, Leather and leather products, Pharma and Gems and jewelry. It is not advantageous but it is not devastating also as it is equal to tariff on China. If the reciprocal tariff principle holds, the other Asian competing nations also have tariff in the comparable range. On the positive side, breaking of uncertainty is better and we can get to business”, says FISME communique.
The proposed deal was intended to pave the way for a broader Bilateral Trade Agreement (BTA), originally targeted for finalisation by September–October this year.
Talks broke down ahead of the US’s implementation of country-specific reciprocal tariffs.
The newly announced levy is only marginally lower than the 26 percent tariff President Trump had signalled earlier in April.
Indian exporters already contend with a 10 percent baseline tariff, over and above WTO-compliant duties.
The additional 25 percent tariff is expected to raise the cost of Indian goods in the US, potentially affecting trade volumes and competitiveness.
President Trump, in a statement on his social media platform Truth Social, criticised India’s trade practices and its strategic alignment with Russia.
“While India is our friend, their tariffs are among the highest in the world, and they maintain strenuous and obnoxious non-monetary trade barriers,” he said, citing India’s defence and energy procurements from Russia as contributing factors.
He added that the US has a ‘massive’ trade deficit with India, which recorded USD 86.5 billion in exports to the US in FY25, resulting in a trade surplus of USD 40.8 billion.
White House economic adviser Kevin Hassett echoed Trump’s sentiment, stating, “President Trump is frustrated with the progress made with India, but believes the 25 percent tariff will help address the situation in a way that benefits the American people.”
India’s Ministry of Commerce & Industry responded by reaffirming the government’s commitment to a fair and balanced trade agreement through continued dialogue.
“The Government attaches the utmost importance to protecting and promoting the welfare of our farmers, entrepreneurs, and MSMEs,” it said in a statement, adding that all necessary steps would be taken to safeguard national interest.
It also referenced India’s recent signing of a Comprehensive Economic and Trade Agreement with the UK as an example of its pragmatic approach to trade negotiations.
(KNN Bureau)
