Who Will Be Most Impacted by Trump’s 25% Tariff Hit?
US President Donald Trump has announced a 25% tariff on products imported from India starting 1 August 2025, a move expected to have a broad impact on India’s export industries and economy. The step is being seen as a response to India’s high tariffs, non-monetary trade barriers, and US displeasure over India’s defence and energy purchases from Russia. In a post on his social media platform, Trump wrote that India’s tariffs are “among the highest in the world,” creating hurdles in trade. He also warned India over its energy imports from Russia. The tariff will take effect from 1 August and will impact the $129.2 billion bilateral trade between India and the US.
Which sectors will be most affected?
1. Gems and Jewellery Sector
India’s gems and jewellery industry will be hit the hardest, as the US imports nearly $10 billion worth of gems and jewellery from India each year. With the 25% tariff, products will become costlier, potentially disrupting supply chains and putting thousands of jobs at risk. The sector is in a “deeply concerning” state and demand is likely to be negatively impacted.
2. Pharmaceuticals
India is the largest supplier of generic medicines to the US, exporting nearly $8 billion worth annually. Although the pharma sector is currently exempt from tariffs, uncertainty looms. Major companies like Sun Pharma, Dr. Reddy’s, and Cipla earn over 30% of their revenue from the US. The sector is under close watch, as any policy change could deliver a significant blow.
3. Electronics
Companies like Apple have shifted iPhone assembly from China to India to avoid tariffs imposed on China. With India now facing tariffs, that strategy could suffer setbacks. Indian electronics exports, worth around $14 billion, are expected to be impacted, making exports costlier and reducing competitiveness.
4. Textiles and Ready-Made Garments
India’s textile, home fabric, and footwear industries supply major American retail giants. With countries like Vietnam and Indonesia facing lower tariffs, India’s competitive edge may erode. This sector, too, is expected to come under pressure due to the new tariff regime.
5. Auto Parts and Automobiles
Indian automobile companies like Tata Motors may face reduced orders from the US, affecting both trade and employment.
6. Oil Refining Companies
India sources 37% of its oil requirements from Russia. Due to US sanctions on Russia, access to this crude oil may become expensive or difficult, impacting the profits of companies like Indian Oil and Reliance.
Impact on India’s GDP
Experts estimate that if the 25% tariff remains in place through FY 2025-26, India’s GDP could shrink by 0.19% to 0.5%, translating to an annual loss of around ₹2,396 per household. The effect would be particularly felt in MSME hubs and export centres in Maharashtra, Gujarat, Tamil Nadu, and Karnataka. India’s share of global exports is just about 2.4%, so while the overall impact may be limited, it will be significant for certain sectors.
Political and Diplomatic Perspective
Trump has called India’s trade policies “the most strenuous and obnoxious non-monetary trade barriers.” He also expressed displeasure over India’s defence and energy purchases from Russia. Analysts see this move as an attempt to exert pressure during trade negotiations. While the US is seeking to strengthen strategic ties with India, these geopolitical tensions have strained the relationship.
India’s Strategy on Tariffs
The Indian government has assured that it will continue dialogue for a bilateral trade agreement while safeguarding national interests. Industry bodies have voiced concern that the tariffs will weaken the competitiveness of Indian goods in the US market. Companies will need to improve production technology to bring down costs and maintain their position.
Industry leader Harsh Goenka has described this not just as a crisis but as an opportunity, suggesting India should focus more on European and ASEAN markets. Pharma and steel sectors have some protection from tariffs, while the IT sector remains unaffected. According to him, this is a moment for India to redefine its export and production approach.
New Markets for India
India will need to intensify efforts to discover new markets, diversify exports, and cut production costs. Opportunities exist in regions like Europe, the Middle East, and Africa. India can turn the global supply chain reshuffle to its advantage. At the same time, policy reforms will be essential to make domestic production more competitive globally.
Conclusion
The 25% US tariff coming into effect on 1 August 2025 will significantly impact several Indian export sectors, including gems, pharmaceuticals, electronics, textiles, and automobiles. It could strain India-US trade ties and weaken India’s export competitiveness, while causing a slight dent in GDP.
However, this challenge also opens up opportunities for India. The country must refine its export strategy, seek new markets, and boost production efficiency. Both the government and industries will need to work together to turn this shift into a positive direction, ensuring India maintains strength in the global economic competition.
It is now evident that the course of upcoming trade negotiations between India and the US will be crucial in balancing both nations’ financial and strategic interests and in keeping their bilateral relationship strong.
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