How Will the New 25% Tariff Impact India's Exports to the USA?

The USA's recent decision to impose a 25% tariff on Indian-origin goods starting August 7 raises significant concerns for India's export market. The Global Trade Research Initiative (GTRI) warns that this could lead to a drastic reduction in exports, with estimates suggesting a 30% decline in FY 2026. While certain categories like pharmaceuticals and electronics are exempt, the overall impact on trade relations between India and the USA could be profound. Discover the details of this executive order and its potential consequences for Indian exporters.

By Narendra Chaudhary Aug 1, 2025, 15:38 IST

Significant Changes in Trade Relations

New Delhi: The recent announcement by the USA to implement a 25% tariff on all goods originating from India starting August 7 has raised concerns about the potential impact on Indian exports, according to the Global Trade Research Initiative (GTRI).

An analysis conducted by GTRI indicates that this tariff will not affect certain exempt categories, which include pharmaceuticals, active pharmaceutical ingredients (APIs), energy products, and various electronics and semiconductors.

As per President Donald Trump's executive order, India will be subjected to these tariffs, which are part of a broader strategy affecting nearly 70 countries worldwide.

Ajay Srivastava, the founder of GTRI, remarked, "This decision could significantly harm India's export capabilities to the US, marking a challenging phase in India-US trade relations."

The executive order, titled 'Further Modifying The Reciprocal Tariff Rates,' outlines that tariffs might be adjusted if countries negotiate favorable terms with the US.

The 25% tariffs will not apply to exempt categories, which include finished pharmaceutical products, APIs, energy resources like crude oil and natural gas, critical minerals, and a variety of electronics such as computers and smartphones.

Preliminary estimates suggest that India's goods exports could plummet by 30% in FY 2026, dropping from USD 86.5 billion in FY 2025 to USD 60.6 billion in FY 2026.