US slaps 25% extra tariff on Indian goods, raising export concerns

The US has imposed an additional 25% tariff on Indian goods, doubling the total levy to as high as 50–63% on several sectors. The move, linked to India’s purchase of Russian oil, is expected to hit labour-intensive exports such as textiles, gems, and seafood, and could drag India’s annual shipments to the US below US$ 50 billion despite a strong start to FY25.

Trade circles had been bracing for impact, and many Indian exporters rushed to complete US orders ahead of a fresh tariff hike. On Tuesday, Washington formally issued a “notice of implementation” to New Delhi, confirming an additional 25% levy on Indian imports linked to India’s purchases of Russian oil.

This latest move brings the overall tariff burden to a prohibitive 50% above most-favoured nation (MFN) rates, with effective duties reaching as high as 63% for sectors such as textiles and apparel.

Although the US Department of Homeland Security said the new duty would take effect from Wednesday, it has allowed a three-week grace period for consignments already in transit to enter at lower rates.

Prime Minister Narendra Modi, speaking in Ahmedabad, described the current trade environment as one of “economic selfishness,” but stressed that India was prepared to withstand external pressure. He assured that vulnerable communities, particularly farmers and cattle rearers, would be protected even as global trade frictions escalate.

Major hit to Indian exports

According to India’s finance ministry, the higher tariff will affect over half of India’s exports to the US. Independent trade groups project an even larger impact. Delhi-based think tank GTRI estimates that nearly two-thirds of Indian exports to the US will now face tariffs of 50% or more — a blow to labour-intensive sectors such as textiles, seafood, and gems and jewellery.

India exported goods worth US$ 87 billion to the US in 2024. Despite strong growth of 21% year-on-year in April–July 2025, total shipments for the current fiscal may fall below US$ 50 billion due to the new duties.

Around 30% of exports, such as pharmaceuticals, energy and electronics, remain duty-free for now. But even medicines could come under pressure in future rounds. Meanwhile, commodities like steel, aluminium and copper face 50% tariffs globally, not just for India, and automobiles continue to attract 25%.

With advance knowledge of the tariff hike, exporters accelerated deliveries ahead of the deadline. FIEO Director General Ajay Sahai noted that merchandise exports to the US surged 21% in April–July to US$ 33.53 billion, with many exporters even switching to costly air freight in August to beat the August 27 cut-off.

High-value categories such as gems and jewellery used this route to meet Christmas season orders. Normally, US buyers would now be placing orders for the summer season, but many are pausing purchases until there is greater clarity on tariffs, Sahai added.

The new US levy makes India one of the highest-tariffed countries in American trade policy, alongside Brazil. A US delegation that was scheduled to arrive in New Delhi this week for the sixth round of Bilateral Trade Agreement (BTA) talks has cancelled its trip.

Diplomatic engagement continues through other channels, but sources say any relief may depend on progress in the Russia-Ukraine peace process, where US President Donald Trump is personally attempting to broker an agreement. A breakthrough could potentially see the penal tariffs rolled back, they indicated.