Trump Slaps 26% Tariff On Indian Goods: Impact On Trade And Economy
US President Donald Trump has unveiled a sweeping tariff policy, imposing a 26% reciprocal duty on Indian imports as part of his broader economic strategy. Announcing April 2, 2025, as ‘Liberation Day,’ Trump accused foreign nations of exploiting the US through unfair trade practices and justified the move as a corrective measure rather than a penalty.
During a White House address, Trump outlined a tariff structure targeting major trading partners, including 34% on Chinese goods, 26% on Indian products, 20% on European Union imports, and similar measures against South Korea, Taiwan, Vietnam, and others. He specifically highlighted India’s high tariffs on automobiles and motorcycles, stating that while India levies a 70% duty on foreign cars, the US charges only 2.5% in return.
The new tariff regime is expected to have varying implications for India’s economy. Sectors like agriculture may remain resilient, with Indian exports such as seafood and rice continuing to find favor in US markets. The pharmaceutical industry, a critical pillar of India’s trade with the US, has been spared from the increased duties, reflecting India’s strategic role in global drug supply chains. However, manufacturing sectors such as chemicals, metal products, and jewellery could suffer losses estimated at up to US$ 7 billion annually, according to Citi Research.
Despite the trade barriers, analysts suggest India is relatively insulated from the broader impact of Trump’s tariffs. With only 2.2% of its GDP reliant on US exports, far lower than Vietnam’s 25.1%, India’s economy remains driven by domestic consumption. The government is already strategizing its response, including negotiating trade concessions with the US, expanding market access, and bolstering domestic manufacturing through production-linked incentives (PLI).
India and the US are currently in discussions to finalize a comprehensive trade and investment agreement by late 2025, aiming to increase bilateral trade from $190 billion to $500 billion by 2030. India is also considering tariff reductions on select US imports and increasing its procurement of American goods in defense, technology, and energy sectors to maintain trade stability.
While Trump’s tariffs could disrupt global trade, they may also present an opportunity for Indian manufacturers to fill supply chain gaps left by China and Vietnam. However, economists warn that potential inflationary pressures and market volatility could offset initial gains. As trade negotiations unfold, India’s ability to adapt its policies and leverage global shifts will be crucial in sustaining its economic momentum.
