US President Donald Trump on Wednesday imposed a 25% tariff on goods imported from India starting August 1, as well as an unspecified penalty for buying Russian arms and oil - moves that could strain relations with the world's most populous democracy.
The US decision singles out India more severely than other major trading partners, and threatens to unravel months of talks between the two countries, undermining a key strategic partner of Washington’s and a counterbalance to China.
"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," Trump wrote in a Truth Social post.
"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!"
In response, the Indian government said in a statement that it was studying the implications of Trump's announcements and remained dedicated to securing a fair trade deal with the US.
"India and the US 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," it said.
The White House had previously warned India about its high average applied tariffs - nearly 39% on agricultural products - with rates climbing to 45% on vegetable oils and around 50% on apples and corn.
Russia continued to be the top oil supplier to India during the first six months of 2025, making up 35% of overall supplies.
The United States, the world's largest economy, currently has a $45.7 billion trade deficit with India, the fifth largest.
White House economic adviser Kevin Hassett said Trump has been frustrated with the progress of trade talks with India and believed the 25% tariff announcement would help the situation. Hassett said more information on the additional penalty would be made "shortly."
The new US tax on imports from India would be higher than many other countries that struck a deal with the Trump administration recently. Vietnam's tariff is set at 20% and Indonesia's at 19%, while the levy for Japan and the European Union is 15%.
"This is a major setback for Indian exporters, especially in sectors like textiles, footwear and furniture, as the 25% tariff will render them uncompetitive against rivals from Vietnam and China," said S.C. Ralhan, president of the Federation of Indian Export Organization.
The news pushed the Indian rupee down 0.4% to around 87.80 against the US dollar in the non-deliverable forwards market, from its close at 87.42 during market hours. Gift Nifty futures were trading at 24,692 points, down 0.6%.
CONTENTIOUS ISSUES
US and Indian negotiators have held multiple rounds of discussions to resolve contentious issues, particularly over market access into India for US agricultural and dairy products.
In its latest statement, India said it attached the utmost importance to protecting and promoting the welfare of its farmers, entrepreneurs and small businesses.
"The government will take all steps necessary to secure our national interest, as has been the case with other trade agreements," it said.
The setback comes despite earlier commitments by Prime Minister Narendra Modi and Trump to conclude the first phase of a trade deal by autumn 2025 and expand bilateral trade to $500 billion by 2030, from $191 billion in 2024.
Since India's short but deadly conflict with arch South Asian rival Pakistan, New Delhi has been unhappy about Trump's closeness with Islamabad and has protested, which cast a shadow over trade talks.
"Politically the relationship is in its toughest spot since the mid-1990s," said Ashok Malik, partner at advisory firm The Asia Group. "Trust has diminished. President Trump's messaging has damaged many years of careful, bipartisan nurturing of the US-India partnership in both capitals."
Besides farm products access, the US had flagged concerns over India's increasingly burdensome import-quality requirements, among its many non-tariff barriers to foreign trade, in a report released in March.
The new tariffs will impact Indian goods exports to the US, estimated at around $87 billion in 2024, including labor-intensive products such as garments, pharmaceuticals, gems and jewelry, and petrochemicals.
