Trade War Heats Up: US Slaps Tariffs on India

As of July 31, 2025, the trade relationship between India and the United States is at a crossroads of heightened tensions and no concluded trade agreement. The U. S. has levied a 25% tax on a wide spectrum of Indian exports—including cars, steel, aluminum, smartphones, and many other products—effective August 1, 2025. Enacted under President Trump, this important action specifically excludes semiconductors and pharmaceuticals. The United States sees these tariffs as a retaliatory reaction to India's claimed significant trade obstacles and ongoing geopolitical ties, especially its purchase from Russia of defense and energy.

Despite this imposition of tariffs, both countries are energetically negotiating ongoing trade, which has reached an advanced level. Important points of dispute remain, particularly on market access for U. S. agricultural and dairy products, as well as on the acceptance of genetically modified crops in India. While India keeps firmly in protecting its sensitive agricultural and dairy industries, the U. S. is advocating more market access. Discussions are set to heat up with a U. S. delegation visit to India slated in late August, hoping for a full agreement possibly by September or October, or at least an interim agreement first.

Particularly those now affected by the new taxes, India's export industries should see negative immediate financial effects. Should these tariffs stay in effect, they could somewhat affect India's GDP in the next financial year. The main sticking points center on U. S. requests for reduced Indian tariffs on industrial goods and more access for its agricultural products against India's need to safeguard sensitive industries and strive for the abolition of current U. S. tariffs on its steel, aluminum, and auto exports. Though both administrations show great resolve in striking a mutually agreeable trade agreement by fall, this fast rise highlights a collapse in pre-deadline talks.