Trump Urges US Tariff on India: 20–25% Likely But Not Final
Trump suggests India may face 20–25% tariffs if no trade deal is reached by August 1. Talks continue; India braces for impact as rupee weakens.
US-India Trade Tensions Escalate: Tariffs Loom as Deadline Nears
The ongoing trade negotiations between the United States and India have reached a critical juncture, with US President Donald Trump indicating that India could face tariffs ranging from 20% to 25% if a comprehensive trade deal is not finalized soon. While the August 1, 2025, deadline for the implementation of reciprocal tariffs looms, Trump has clarified that the final levy has yet to be decided, leaving room for continued talks.
This development comes amidst persistent disagreements, particularly concerning India's tariffs on agricultural and dairy products, and its stance on genetically modified crops. The uncertainty has sent ripples through the Indian export sector, with businesses bracing for potential impacts.
The Latest from Washington: Trump's Stance
Speaking to reporters aboard Air Force One on Tuesday, July 29, 2025, President Trump addressed the stalled trade talks with India. When asked if India would face a 20-25% tariff rate, he responded, "Yeah, I think so." He reiterated his long-standing grievance that "India has charged basically more tariffs than almost any other country over the years."
However, Trump also acknowledged India as a "good friend" and stated that the final tariff rate had not been finalized, emphasizing that negotiations are still ongoing. This nuanced statement suggests that while the threat of higher tariffs is real, the door for a mutually agreeable solution remains open. The proposed 20-25% rate is slightly lower than the 26% reciprocal tariff previously announced in April.
The Sticking Points: Why a Deal Remains Elusive
Despite multiple rounds of negotiations, a comprehensive bilateral trade agreement between the US and India has remained elusive. The primary points of contention include:
- Agricultural and Dairy Products: India has steadfastly refused to lower levies on farm and dairy products, citing concerns for its domestic farmers. It has also maintained a firm stance against allowing imports of genetically modified soybeans or corn.
- Market Access: The US is pushing for greater market access for its industrial goods, including electric vehicles, wines, and petrochemical products.
- Existing Tariffs: India is seeking the removal of the additional 26% reciprocal tariff announced by the US and the easing of tariffs on steel, aluminum, and the automobile sector.
Commerce and Industry Minister Piyush Goyal has stated that while discussions are progressing rapidly, India's national interests remain paramount. He emphasized that establishing trade agreements requires thorough consideration and cannot be constrained by artificial deadlines.
Impact on Indian Exports and the Rupee
The prospect of higher US tariffs has created considerable anxiety among Indian exporters. Businesses, particularly in sectors like textiles, gems and jewelry, and agrochemicals, are keeping a close watch on developments.
- Export Uncertainty: Exporters report that orders are on hold due to the uncertainty surrounding Trump's next move. While some consignments are still being shipped at existing duty rates, buyers are hesitant to place new orders until there is clarity.
- Competitive Disadvantage: With a 20-25% levy, India would be positioned competitively with Bangladesh in the textiles market, but still behind other major trading partners like Vietnam (20%), Indonesia (19%), the EU and Japan (15% each), and the UK (10%). Chinese imports into the US currently face a 30% customs duty.
- Rupee Depreciation: The Indian Rupee (INR) has already shown signs of weakness, breaching ₹87.50 per US Dollar earlier in 2025. Analysts forecast continued rupee depreciation, driven by capital outflows, global trade risks, and reduced RBI intervention. Escalating global trade tensions, including renewed US tariff threats, further sour risk sentiment. A failure to secure a trade deal or the imposition of higher tariffs could add further pressure on the rupee.
However, some officials and industry experts remain optimistic. They argue that American retailers, who often enjoy significant margins, might absorb some of the tariff impact. Additionally, the long-term trade prospects between the two nations are seen as strong, with both exporters and importers anticipating an eventual agreement.
Diplomatic Efforts and Future Outlook
Despite the looming deadline, diplomatic channels remain active. A team of US trade officials is scheduled to visit New Delhi from August 25 for the next round of negotiations. This will be the sixth round of talks for the proposed bilateral trade agreement.
US Trade Representative Jamieson Greer has indicated that more negotiations are needed to gauge India's willingness to open its market further. He emphasized that President Trump is more interested in "good deals" than "quick deals."
The current situation highlights the complex nature of international trade negotiations, especially when dealing with a protectionist stance from both sides on certain sensitive sectors. While the immediate future holds uncertainty for some Indian exports, the broader bilateral trade volume, which reached approximately $129 billion in 2024 with India posting a significant trade surplus, suggests a strong underlying relationship that both countries would likely want to preserve.
Conclusion: A Defining Moment for US-India Trade
The coming weeks, particularly leading up to and following the August 1 deadline, will be crucial in determining the immediate trajectory of US-India trade relations. Businesses and policymakers in India are preparing for various scenarios, hoping for a breakthrough that can avert significant tariff impacts and pave the way for a more stable and mutually beneficial trade environment.
The outcome of these negotiations will not only shape bilateral trade but also influence global trade dynamics in the coming months.
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