On April 2, 2025, President Donald Trump announced a new wave of reciprocal tariffs intended to rectify the imbalance of trade for the United States, estimated at 1.2 trillion dollars. The policy introduced a two-step tariff structure by slapping a 10% base tariff on all imports, effective April 5, followed by more invasive country-specific duties from April 9. Trump also announced a 90-day pause on tariffs for all countries, except China, for which he imposed an immediate increase in tariffs to 125 percent. For India, this meant an additional duty of approximately 27% on many export categories.
The U.S. Tariff Strategy and Its Rationale
The U.S. policy of imposing additional duties on imports follows the mantra of imposing a blanket base tariff of 10 percent — a significant jump from the pre-Trump level of about 2.5% — and then applying further, country-specific duties calculated using a “USA discounted reciprocal” method. India, a major contributor to the U.S. trade deficit, is assigned a 27% duty. U.S. officials have cited India’s domestic policies as a key factor, such as the bound agricultural tariff rate of 113.1% with peak levels of 300% for select commodities, and the sudden tariff increases in solar modules and telecommunications. These policy inconsistencies have fed into the U.S. rationale for imposing higher duties on Indian imports.
India–U.S. Trade Relations
The United States continues to be the primary export market for Indian goods. Over recent fiscal years, merchandise exports from India to the U.S. have shown a year-to-year growth ranging between $75–78 billion despite the supply chain disruptions that started in FY24. A silver lining amidst this is the exclusive visit of a U.S. trade delegation to India, underscoring the country’s unique position in global trade talks and opening the door to potential tariff reductions.
Sector-Wise Overview
The new tariff regime affects a broad range of export sectors. Below is a consolidated table based on publicly available data:
These figures are compiled from publicly available reports and trade analyses as of early 2025.
Sector-Specific Insights
- Textiles & Garments: Export value of $5 billion. India competes strongly with Vietnam, now under tariffs as high as 46%.
- Pharmaceuticals: $8 billion in generics and APIs. Exempted from new tariffs due to public health importance.
- Chemicals: Indian goods face a 26% duty vs. 34% for China, providing a competitive edge.
- Auto Components & Machinery: $1.5 billion exports face 27% duty; competitiveness at risk versus Japan’s 24% duty.
- Agriculture & Processed Foods: Tariffs could erode India’s $6.6 billion price-advantage in the U.S. market.
- Ceramics: Facing 47.4% tariffs — significant hike expected to impact volumes.
- Energy (Solar Modules): $1.96 billion in solar exports remain exempt under USTR guidelines.
- Gems, Jewelry & Electronics: Facing up to 20% duties on a market worth over $11 billion.
A Newer and Wider Vision of the Opportunistic Scenario
Recent data indicate that Indian merchandise exports to the U.S. continue to display resilience amid evolving trade policies. While the changes happen, the chances and prospects fall inside the zone that is full of opportunities. For instance, the pharmaceutical sector is benefiting from its exemption, while textiles enjoy relatively lower duties compared to competitors.
India’s proactive engagement in trade negotiations and its diversified export base are paving the way for deeper global supply chain integration. These dynamics open avenues for Indian businesses to innovate, realign strategies, and expand their U.S. market footprint.
Disclaimer: This article is based on the latest publicly available data and policy announcements as of April 2025. Any future developments or official changes will be reviewed and reflected in updated versions of the article accordingly.
