With US President Donald Trump finally announcing a 25 per cent tariff as well as secondary sanctions for India starting August 1, several key India industries, especially electronics, pharmaceuticals, and textiles, will get critically affected.
Trump targets India’s trade surplus with new tariff
In a post on Truth Social, Trump said, “Remember, while India is our friend, we have, over the years, done relatively little business with them because their Tariffs 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.” He also cited India’s ties with Russia as he explained the rationale of his decision. The US has repeatedly also flagged the ‘massive’ US-India trade deficit.
Now, the tariff makes sense for the United States with India’s trade surplus with the country at $41.18 billion in FY25. During the last fiscal, India’s exports to the US rose by 11.6 per cent to $86.5 billion, while imports rose at 7.4 per cent to $45.3 billion. This resulted in a higher trade surplus of $41 billion. The increasing trade surplus is definitely not good news, considering Donald Trump is seeking to narrow it. And with this tariff announcement, a number of sectors will get affected, likely decreasing the trade surplus.
Garima Kapoor, Economist and Executive Vice President, Elara Capital, said, “The 25 per cent tariff rate is certainly a negative development as it compares to lower rates for peers such as Vietnam, Indonesia and Philippines which compete with India in a similar category of labour-intensive products and electronic goods.”
Here are the five product categories that top India’s exports to the US:
1. Smartphones: According to a market report, India has officially surpassed China to become the top smartphone supplier to the US as of Q2 2025. This entails a 44 per cent market share for US-bound shipments. Made-in-India smartphones, prized for their affordability and features, have become household staples in America. Not just domestic companies but multinational brands that are operating from Indian manufacturing hubs are driving this surge. It bodes well for them considering India’s competitive labour costs, technology adoption and the government’s ‘Make-in-India’ push backed by financial incentives. The sector saw over $3 billion worth of exports in January 2025.
2. Petroleum Products: As Asia’s second-largest refining hub, India exports massive volumes of petroleum products—such as petrol, diesel, jet fuel, gasoline, and LPG—to the United States. Over time, Indian refiners have become indispensable to America’s energy supply, capitalizing on high-quality processing and competitive pricing. The export value of refined petroleum products crossed $20 billion in 2024.
3. Gems and Jewellery: The United States is the largest importer of Indian gems and jewellery, especially diamonds and gold. India exports both raw gemstones and exquisite crafted pieces. This sector contributed to over $8.5 billion in the last year.
4. Pharmaceuticals: The Indian pharmaceutical sector is the backbone of affordable medicine globally. The US is the biggest importer of generics, vaccines, and active ingredients that help to lower healthcare costs for millions of its citizens. Major Indian pharma companies supply FDA-compliant drugs to America. Exports in this sector exceeded $7.5 billion in 2025.
5. Textiles and Apparel: From handloomed silks to industrially manufactured cotton apparel, Indian textiles and garments contribute majorly to India’s exports to the US. In 2025, Indian textile and garment exports to the US surpassed $2.5 billion.
To conclude…
The US tariff announcement could trigger a new wave of trade negotiations or retaliatory tariffs by India. Before the imposition, effective August 1, the duty rates on import of Indian goods by the US varied but were generally much lower and ranged mostly below 3 per cent for many product categories. “If no deal is signed by Sept-October, we see a downside to full year GDP growth estimate for India by 20 bps,” Garima Kapoor said. Going forward, industry and analysts will be watching closely for the next steps from New Delhi.