Trump Eyes 20–25% US Tariff on India Amid Trade Tensions

Trump Eyes 20–25% US Tariff on India Amid Trade Tensions

New Delhi, India – July 30, 2025 – The trade relationship between the United States and India is facing renewed pressure as US President Donald Trump has indicated that India could be hit with tariffs ranging from 20% to 25% if a comprehensive trade deal is not reached by the looming August 1 deadline. This warning comes amidst ongoing, yet stalled, negotiations, and has sent ripples through India’s export sector and currency markets.

Trump’s Latest Warning: “You Just Can’t Do That”

Speaking to reporters on Tuesday, July 29, 2025, aboard Air Force One, President Trump addressed the persistent trade imbalances with India. When questioned about a potential 20-25% tariff rate for New Delhi, he responded, “I think so.” He reiterated his long-standing criticism of India’s high tariffs, stating, “India has been a good friend, but India has charged basically more tariffs than almost any other country. You just can’t do that.”

While the threat of these significant tariffs is clear, Trump also added a caveat, noting that the “final levy had still not been finalized.” This leaves a narrow window for a potential breakthrough, though the August 1 deadline for the imposition of reciprocal tariffs is just around the corner. The proposed 20-25% rate is slightly lower than the 26% reciprocal tariff that was initially announced in April but subsequently paused to allow for negotiations.

Stalled Negotiations and the August 1 Deadline

The US and India have been engaged in multiple rounds of trade talks aimed at forging a bilateral agreement. However, significant sticking points remain, making an interim deal before the August 1 deadline increasingly unlikely.

• Agricultural and Dairy Products: India has maintained a firm stance against lowering tariffs on farm and dairy products, citing the need to protect its domestic agricultural sector. It has also resisted demands to allow imports of genetically modified (GM) soybeans or corn.
• Market Access: The US is pushing for greater market access for its industrial goods, including electric vehicles, wines, and petrochemical products.
• Existing Tariffs: India, on its part, is seeking the removal of the additional 26% reciprocal tariff imposed by the US and the easing of tariffs on steel, aluminum, and the automobile sector.

US Trade Representative Jamieson Greer recently stated that “more negotiations” are needed with India to gauge its willingness to open its market further. A US delegation is scheduled to visit New Delhi in the latter half of August (starting August 25) for the next round of talks, confirming that a deal will not be inked before the current deadline. This delay, while reflecting the complexity of the issues, is seen as a sign of continued pressure from the White House.

Impact on Indian Exports and the Economy

The prospect of 20-25% tariffs from the US, a major export destination for India, has raised concerns among Indian businesses and policymakers.

• Export Sector Uncertainty: Exporters, particularly in labor-intensive sectors such as textiles, gems and jewelry, leather goods, and pharmaceuticals, are closely monitoring the situation. Industry bodies report that orders are being put on hold due to the uncertainty, with buyers waiting for clarity before committing to new production. While some consignments are still moving at existing duties, the overall sentiment is cautious.
• Competitive Disadvantage: A 20-25% tariff would place Indian exports at a disadvantage compared to competitors like Vietnam (20%), Indonesia (19%), Japan (15%), and the European Union (15%), who have secured lower tariffs or trade deals with the US. China currently faces a 30% customs duty on its imports into the US.
• Rupee Depreciation: The Indian Rupee (INR) has already shown signs of weakness, extending its decline against the US Dollar. On Wednesday, the rupee slid to near 87.30, nearing a fresh four-month high for the USD/INR pair. This depreciation is attributed to persistent capital outflows by Foreign Institutional Investors (FIIs) from Indian equity markets and the escalating trade tensions. A higher import duty on Indian goods could further diminish the competitiveness of Indian exports, putting additional downward pressure on the rupee. The Reserve Bank of India (RBI) is reportedly considering intervention in the forex markets to limit the rupee’s depreciation.

Despite the immediate concerns, some Indian officials remain cautiously optimistic about reaching a comprehensive trade agreement by Fall (September-October). They argue that American retailers, who often operate on significant margins, might absorb some of the tariff impact to maintain supply chains. Furthermore, the overall bilateral goods trade, which reached approximately $129 billion in 2024 with India holding a substantial trade surplus, highlights the importance of the relationship for both nations.

Conclusion

Donald Trump’s warning of 20-25% tariffs on Indian goods underscores the ongoing complexities and tensions in US-India trade relations. As the August 1 deadline approaches without a finalized deal, India is bracing for potential economic repercussions, particularly on its exports and the value of the rupee. While negotiations are set to continue later in August, the immediate future remains uncertain. Both nations face the challenge of balancing their respective national interests with the need to foster a stable and mutually beneficial trade environment.

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