Trump’s 25% Tariff Bomb on India: Big Jolt to Economy Ahead

National News: Donald Trump has announced the imposition of a 25% tariff on India. The new tariff rates will be implemented from August 1. Trump said that India is being punished for buying oil from Russia. Not only this, Trump has also announced the imposition of a penalty on India along with a tariff. Announcing the tariffs, Trump said, "Remember, while India is our friend, we have done relatively little trade over the last few years because India has very high tariffs, the highest in the world.

And they have the most stringent and obnoxious non-monetary trade barriers of any country. Also, they have always bought the vast majority of their military equipment from Russia, and they are Russia's largest energy buyer along with China. At a time when everybody wants Russia to stop killing in Ukraine, all is not well!"

What will be the effect of Trump's tariffs?

What will be the impact of Trump's 25 percent tariff announcement on India's economy? This is the question on everyone's lips now. After the new tariff rates are implemented, some things may become expensive and some things may become cheaper. 

What will be cheaper?

Bilateral trade between India and the US is projected to be $129-130 billion in 2024, with India posting a surplus of $45-46 billion. Some sectors, such as information technology (IT) and some pharmaceuticals, can still benefit from duty-free access. India has recently reduced tariffs on products such as motorcycles and alcoholic beverages, which could keep trade in these sectors relatively cheaper. Moreover, India can offset some of the losses by relying on its domestic demand, which accounts for 60% of GDP.

What will be expensive?

Sectors like pharmaceuticals, auto parts, gems, and electronics will be most affected by Trump's 25% tariff policy. The US imported $9.8 billion worth of medicines from India in 2024, which is 40% of total drug exports. Indian medicines will become expensive in the US market if a 200% pharma tariff is imposed.

Auto parts already have a 25% duty, and this could reduce the competitiveness of Indian exporters, especially when countries like Vietnam and Indonesia have lower tariffs. Indian electronics, whose imports were worth over $12 billion in 2024, could also become expensive.