Business APAC
June 5, 2025
The U.S. has reignited trade tensions with India by reinstating 26% tariffs on Indian goods, a move by former President Donald Trump that has sent ripples across India’s key export industries. With a critical July 9 deadline fast approaching, both nations are in an urgent race to renegotiate terms and avoid lasting damage.
What Are the 26% Tariffs on Indian Goods?
Announced in April 2025, the 26% tariffs on Indian goods were part of Trump’s push to protect American manufacturing and “reshore” jobs. The duties hit major Indian exports like aluminum, textiles, auto components, and seafood, valued at $5.76 billion annually.
Trump stated during a rally in Ohio:
“We’re putting American workers first. India’s been taking advantage for too long. That ends now.”
This isn’t Trump’s first trade strike against India. Back in 2019, his administration revoked India’s GSP (Generalized System of Preferences) benefits—costing Indian exporters over $260 million annually.
How Are Indian Businesses Affected?
The impact of the 26% tariffs on Indian goods was immediate:
- Vedanta, India’s leading aluminum exporter, reported a 19% decline in U.S. shipments in May.
- Seafood exporters in Kerala and Gujarat witnessed canceled orders and halted contracts.
- SMEs in Tamil Nadu’s textile sector are struggling with sudden price volatility.
According to FIEO (Federation of Indian Export Organisations), India could lose up to $8–10 billion annually if the tariffs remain in place beyond July.
India’s Two-Track Strategy
India is pursuing both diplomatic negotiations and market diversification to counter the tariffs.
- Urgent Trade Talks
A high-level U.S. delegation led by Commerce Secretary Howard Lutnick arrived in Delhi this week for what may be the final round of talks.
“We want a deal that benefits both nations,” Lutnick told Reuters.
- Exploring New Markets
Indian exporters are pivoting to Japan, ASEAN, Latin America, and Africa to reduce dependency on U.S. demand. The Commerce Ministry has already fast-tracked trade discussions with new partners.
Legal Back-and-Forth in the U.S.
The 26% tariffs on Indian goods were initially blocked by a U.S. federal court citing procedural flaws. However, the Court of Appeals reinstated the tariffs temporarily, giving both sides until July 9 to settle terms.
This legal uncertainty adds pressure, especially for industries with long-term contracts based on older tariff rates.
Impact on Indian Entrepreneurs and the Bigger Picture
A KPMG India report (May 2025) shows that Indian firms with more than 40% U.S. revenue exposure saw a 15–22% drop in Q1 profits. In contrast, diversified exporters reported growth in non-U.S. markets.
Business leaders are being forced to rethink their global strategies:
- Diversify or die: Relying on one export market is now a high-risk move.
- Agility wins: Companies like Dixon Technologies and Titan are already shifting supply chains to Southeast Asia.
- Policy intelligence matters: Keeping pace with global trade politics is now a must for entrepreneurs.
Experts Speak
“The 26% tariffs on Indian goods are more than just a tax—they’re a signal,” said Professor Arvind Panagariya, economist and former NITI Aayog Vice Chairman.
“India must use this moment to become more resilient and globally agile.”
Meanwhile, Indian officials are watching how the U.S. is treating other nations like Vietnam and Mexico, which are getting favorable tariff breaks.
“We’re tracking every trade concession the U.S. makes,” a Commerce Ministry official told the Times of India.
What Happens If No Deal Is Signed?
If no agreement is reached by July 9, the 26% tariffs on Indian goods will become permanent, further widening the trade gap and hurting India’s small exporters the most.
Indian business community is bracing for either scenario—some stockpiling goods, others pulling back on U.S. contracts altogether.
The Trump-driven 26% tariffs on Indian goods may be politically motivated, but for India Inc., they’re a test of adaptability, speed, and global foresight. How businesses respond now will determine their future competitiveness on the world stage.
