Trump Announces 25% Tariffs on Indian Goods, Cites Ties With Russia: Market Mayhem Expected On Thursday

US President Donald Trump has announced a 25 per cent tariff on imports from India, a decision that could have a direct impact on several of India’s top export sectors. The announcement was made on July 29 through a post on Trump’s official handle on X, previously known as Twitter.

The tariffs are set to take effect from August 1 and come in response to what Trump called "imbalanced trade practices" and India’s continued purchase of oil and military hardware from Russia. The move is part of a broader policy stance that seeks to penalise countries maintaining close economic ties with Moscow.

India’s trade relationship with the United States has grown steadily over the past decade, but a formal trade deal remains elusive. Talks have repeatedly stalled over issues such as digital taxes, agricultural imports, and intellectual property protections.

Trump’s statement also mentioned additional penalties linked to India’s energy and defence cooperation with Russia. No specific measures were outlined, but his team is expected to provide more details in the days ahead.

Says Garima Kapoor, economist and executive vice president, Elara Capital, on Trump announcing a 25 per cent tariff on Indian goods: “The 25 per cent tariff rate is certainly a negative development as it compares to lower rate for peers such as Vietnam, Indonesia and Philippines which compete with India in a similar category of labour-intensive products and electronic goods. The currency market had clearly priced this eventually as the USDINR pair moved by more than 70 paise today.”

“The exact details of the tariffs on the exempted items such as pharma and the ones that were charged at a differential rate such as iron, steel and auto is unknown as of now, but inclusion of pharma into tariffs should be incremental negative for India’s exports as US accounts for more than 30% of India’s pharma exports. If no deal is signed by September-October, we see a downside to full year GDP growth estimate for India by 20 bps,” adds Kapoor.

Sectors That May Be Hit

Auto Components And Assemblies

One of the most vulnerable sectors is auto parts. India supplies a wide range of components to American companies, and the new duties will raise landed costs. For firms in Pune, Chennai, and Gurgaon, the shift could reduce orders and hurt margins.

Gems And Jewellery

The United States is a key buyer of Indian diamonds, gold jewellery, and other precious stones. With the higher tariff, exporters may face pricing pressure. The sector already operates in a competitive global market, and the new duties may affect smaller exporters in particular.

Textiles And Apparel

India exports a significant volume of ready-made garments and fabrics to the US. The change in tariff rates may lead to a slowdown in orders, especially from large retailers who may look to other Asian countries with lower duty exposure.

Electronics And Mobile Equipment

The electronics segment, especially mobile phone exports and component shipments, could also see disruption. Although India has grown its capacity in this sector, higher prices may prompt American buyers to look at alternative sources in Southeast Asia.

Engineering And Industrial Machinery

Manufacturers of tools, motors, and machine parts may also be affected. These products are sensitive to even modest increases in pricing and could face tougher competition under the new tariff regime.

Next Steps

The Indian government has yet to release a formal statement, but sources in the commerce ministry say consultations are underway. Trade officials are working with industry bodies to evaluate the scope of the impact and possible responses.

For exporters, the announcement introduces new uncertainty at a time when global trade remains fragile. While India may explore diplomatic channels to de-escalate the situation, companies in affected sectors will likely need to assess pricing, renegotiate contracts, or look to diversify markets.