How Donald Trump’s 'discounted' 26% tariff will impact India

Items like jewellery and precious stones may benefit from the move while auto components and products like clothing could just find the going tough

US President Donald Trump (File) US President Donald Trump addresses a joint session of Congress at the Capitol in Washington, D.C., on March 4, 2025 | AP

Over the course of the night, as India slept, Trump awoke the USA into trade freedom on 'Liberation Day', that’s according to him, by imposing sweeping import duties on nations that trade with the country. This includes a 'reciprocal tariff' of a massive 26% on imports from India, which could be quite a blow to Indian exporters.

"(PM Modi) is a great friend of mine, but I said to him that “you’re a friend of mine, but you’ve not been treating us right," Trump quipped during his speech in the White House lawns announcing the tariff.

"India charges us 52%, so we will charge them half of that — 26 per cent," Trump said.

The new tariff on India will start from next week. Markets around the world have tanked following the announcements, and Indian stocks are expected to follow suit when they open.

The tariff of 26%, some analysts say will be over and above a baseline tariff of 10%, either way, would be a big blow for Indian goods being imported into the US, especially items and products that face market competition from products domestically or from other markets. 

Interestingly, China fares worse, having been slapped 34% on import tariffs. The European Union, interestingly, has been slapped with 20% only and the UK just 10%. This despite the EU being in his crosshairs for being one of the 'worst offenders'/

The new tariffs will impact Indian exports to America badly in two ways — in one stroke, it will make these items more expensive in the domestic market there, which means it will depend on whether there is a cheaper alternative available there, say from another country, that will find more takers. Unique items, like say jewellery and precious stones, might just have a better chance, while auto components and say, products like clothing, could just find the going tough, as not only are there specific tariffs on auto, there could be just be cheaper alternatives available. For example, the originally announced 25% tariff on trade from two of the US’s neighbouring countries, Canada and Mexico, incidentally also America’s biggest trading partners, continue to be on hold. This means, goods from that country could just have an upper hand for the moment.

India’s advantage as it stands now is the fact that both China and Vietnam have been slapped with higher tariffs. This means many similar products, like electronic items in general and iPhones in particular, made in India and being exported to the US will still have an advantage.

India can also hope to get a better deal once the India-US bilateral trade agreement (BTA) is worked out, expected by September-October. The commerce ministry has also been seriously working on rationalising the high tariffs India has been charging the US. That could also play out, because all said and done, everybody knows Donald Trump is a man who believes in 'give and take'.

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