In a stunning bid to recast Indo-US trade relations, US President Donald Trump declared imposing retaliatory tariffs on Indian products on an eye for an eye policy. During a record 1-hour-44-minute speech to the US Congress, the declaration could cost India around ₹61,000 crore each year, with analysts anticipating extreme disruptions in significant export industries.
Key Highlights of the Announcement
- Tariff Effect: The retaliatory tariffs are to become effective from April 2, 2025. The action is to reflect India’s tariffs on American products, thus trying to equalize the trade deficit which Trump had referred to as “unsustainable.” Major Indian export industries like food items, textiles, pharmaceuticals, electrical equipment, gemstones and jewelry, and automobiles are likely to suffer the most from these tariffs.
- Economic Consequences: Business analysts forecast that the tariffs may cause India to lose $7 billion (about ₹61,000 crore) each year. The cost of exports for Indian products in these industries may increase drastically, and hence, their competitiveness in the American market may decrease.
- Background and Rationale: Ever since assuming office on January 20, 2025, Trump has prioritized lowering America’s trade deficit. Trump faulted India’s current tariffs of 7% on wood items and machinery, 15-20% on footwear and transport equipment, and up to 68% on food items. U.S. tariffs on the same items are approximately 5% on average.
- Political Responses in India: Indian trade officials have denounced the action as a violation of World Trade Organization (WTO) norms, threatening to appeal to the WTO in Geneva. Commerce Minister Rajesh Gupta decried the tariffs as “unilateral” and “protectionist,” stressing that India would resort to retaliatory measures if need be.
Sectors at Risk
- Agriculture and Food Exports: US tariffs on farm produce, which are presently 5%, may be increased to the Indian level of 39%. This would most prejudicially hit India’s food and agricultural exports, in which the volume may be low, but the differential tariff is wide.
- Automobiles and Electronics: Tariffs will also affect the import of automobiles and electronics, where Indian exporters will increasingly struggle to compete in the American market.
- Technology and Pharmaceuticals: Since the U.S. is one of the biggest markets for Indian IT services and pharma, these industries might see a slowdown in exports, impacting employment and revenue in India.
Top 5 Products India Imports from the US
| Product | Import Value (in Lakh Crore ₹) | Tariff |
|---|---|---|
| Petroleum Crude | ₹9.51 | 7.5% – 8% |
| Gold | ₹4.22 | 20% |
| Petroleum Products | ₹2.79 | 7.5% – 8% |
| Electronic Components | ₹2.33 | 2.5% – 0.5% |
| Coal and Coke | ₹2.10 | Less than 5% |
Market Reactions
Following the announcement, the BSE Sensex plunged by 2.1%, erasing ₹1.5 lakh crore in investor wealth. The Indian Rupee also slipped to a three-month low against the U.S. Dollar. On Wall Street, stocks of American companies that compete with Indian imports saw a modest rise, reflecting optimism about a more level playing field.
Global Implications
The tariffs are part of a broader plan by Trump’s administration to curb the U.S. trade deficit, which in 2023 stood at more than $670 billion on the back of imports from China, Mexico, and Canada. Already having levied similar tariffs on Mexico and Canada since March 4, 2025, the action against India seems to be a part of an overarching plan to renegotiate U.S. trade agreements worldwide.
Expert Opinions
Economists caution that the rising tariff war may lead to a broader trade war, potentially slowing global growth. According to Dr. Suresh Mehta, an expert on trade policy speaking to Dainik Bhaskar, “The challenge for India will be to diversify its export markets quickly and reduce its reliance on the U.S.” Meanwhile, American business leaders have rallied behind the tariffs, viewing them as a necessity to shield domestic industries.
America First Agenda
As the clock ticks down, both countries are engaged in a high-stakes trade war. For India, the priority will be to try to limit economic harm and diversify into new markets. For Trump, the tariffs are a fulfillment of his ‘America First’ agenda with possible political benefits in the run-up to the 2026 elections.
Whether this boils over into a full-blown trade war or a negotiated settlement is yet to be determined. In the meantime, the world looks on as the two biggest democracies redefine their economic relationship in the shadow of tariffs.
Also Read: How New U.S. Lumber Tariff Affects India?