In a move that ends months of speculation, U.S. President Donald Trump on Wednesday,
July 30, 2025, announced that imports from India will be subject to a 25% tariff on India starting
August 1, along with an unspecified additional “penalty.” The decision, he said, was driven
by India’s continued purchases of energy and military equipment from Russia, high tariff on India
rates, and what he described as “strenuous and obnoxious” non-monetary trade barriers.
“Remember, while India is our friend, we have, over the years, done relatively little business
with them because their tariff on India are far too high, among the highest in the world, and they
have the most strenuous and obnoxious non-monetary trade barriers of any country,” Mr.
Trump wrote on the social media platform Truth Social. “Also, they have always bought a
vast majority of their military equipment from Russia, and are Russia’s largest buyer of
ENERGY, along with China, at a time when everyone wants Russia to stop the killing in
Ukraine — ALL THINGS NOT GOOD! India will therefore be PAYING A TARIFF OF 25%, PLUS
A PENALTY FOR THE ABOVE, STARTING ON AUGUST FIRST ,” he added.
The announcement comes at a critical juncture, even as India and the United States have been actively engaged in prolonged negotiations for a Bilateral Trade Agreement (BTA) since February 2025. This ambitious agreement is aimed at fostering a more balanced and mutually beneficial trade relationship between the two nations, which have historically experienced friction over tariffs, market access, and trade imbalances. At the outset of these talks, a joint statement released by Indian Prime Minister Narendra Modi and U.S. President Donald Trump expressed optimism about concluding the BTA by the fall of 2025, signaling a new era of economic cooperation.
In parallel with the broader agreement, trade negotiators from both sides have also been working diligently on a more limited “mini-deal” intended to ease immediate tensions. A major goal of this smaller pact was to reverse retaliatory tariffs—especially the U.S.-imposed tariff on India—as well as duties affecting other partner nations. However, despite several rounds of discussions and technical exchanges, the mini-deal remains incomplete, with no formal consensus on key sticking points.
Earlier this week, on Monday, July 28, U.S. Trade Representative Jamieson Greer acknowledged the complexity of the ongoing negotiations and indicated that talks with India were likely to extend beyond the August 1 deadline unilaterally announced by President Trump. Nonetheless, the President’s latest decision to move forward with the 25% tariff and additional penalty has cast serious doubt on the near-term success of either deal. It underscores a growing disconnect between diplomatic efforts and executive-level decisions, raising concerns among policymakers, investors, and global trade analysts about the future trajectory of U.S.-India economic relations.
– While the announced 25% tariff on India is slightly lower than the 26% rate previously
threatened, the nature of the additional “penalty” remains unclear, leaving analysts
and stakeholders waiting to assess its potential implications.
Commerce Ministry on Studying Implications of Tariff on India:
In response, India’s Commerce Ministry issued a statement noting it has taken cognizance
of President Trump’s decision.
“The Government is studying its implications. India and the
U.S. have been engaged in negotiations on concluding a fair, balanced, and mutually
beneficial bilateral trade agreement over the last few months. We remain committed to
that objective,” the ministry said, adding that “it places the highest importance on
safeguarding the interests of Indian farmers, entrepreneurs, and MSMEs [micro, small
and medium enterprises].”
Indian stock markets reacted negatively to the news, opening in the red as trade began for
the day.
– Negotiations between India and the US are likely to continue through August, with a
team from the US expected in India later next month to get hold of a comprehensive
trade agreement. The hope in India is that tariff on India will get negotiated lower or this 25%
tariff on India might be temporary.
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