The year of tariffs: How Trump's policies affected India's exports in 2025

Despite multiple deadline extensions, India failed to reach a trade deal with the US in 2025, leaving exporters grappling with steep tariffs that reshaped competitiveness across key sectors

As Donald Trump returned to the Oval Office for a second term in January this year, his "America first" agenda was loud and clear. Within months of taking office, Trump announced massive reciprocal tariffs on all its global trading partners, sending the markets into turmoil. On April 2, the US marked "Liberation Day", unveiling a sweeping tariff plan that hit India harder than most.

 

While several countries managed to negotiate a settlement, India could not reach a deal despite several deadline extensions. As a result, Indian exports began facing a punishing 50 per cent tariff from August 27, which included a 25 per cent duty and an additional 25 per cent penalty for continuing to buy Russian crude.

 

This came as a severe blow because the US is India’s biggest export destination, accounting for nearly a fifth of outbound shipments. With such a steep duty, Indian goods became far less competitive than those from Vietnam, Bangladesh and Mexico, which continued to enjoy much lower tariffs.

Implementation of tariffs

The US first announced a 26 per cent tariff on Indian goods on April 2. Later, a 10 per cent baseline tariff on all imports to the US, including those from India, came into effect on April 5. The implementation was initially delayed by 90 days until July 9 and then extended to August 1 to allow more time for negotiations.

 

But India was unable to secure a deal even as several neighbouring countries managed to strike trade agreements. On July 30, the US confirmed that a 25 per cent tariff would take effect on Indian goods from August 7, followed by the added penalty that pushed total duties to 50 per cent by August 27.

 

Although critical industries such as pharmaceuticals, semiconductors, energy resources and minerals were spared, several major sectors have been hit hard. According to a September report by KPMG, these sectors were affected the most:

Textiles and apparel

The textile and apparel sector, which depends heavily on the US, took a sharp blow. During the December monetary policy review meeting, Reserve Bank of India (RBI) Governor Sanjay Malhotra noted that textiles have been one of the most severely hit sectors. Nearly 29 per cent of India’s textile and garment exports go to the US. With tariffs rising and competitors like Bangladesh and Vietnam benefiting from lower duties, Indian products lost their crucial price advantage.

 

While India continues to strengthen its position in the European Union by focusing on high-quality, sustainable cotton, the sudden loss of competitiveness in the US has strained exporters and squeezed margins.

Gems and jewellery

The gems and jewellery sector, especially diamonds, had been under stress even before the tariffs. India supplies nearly half of the US' diamond imports, and the new duties come at a time when global prices are falling and sanctions on Russian rough diamonds have disrupted supply chains.

 

The industry is dominated by micro, small and medium enterprises (MSMEs), and higher US tariffs risk reducing orders, putting pressure on small exporters and threatening jobs. To retain access to the US market, several players are considering shifting parts of their processing operations to the UAE, which offers lower tariffs, tax benefits and better export infrastructure.

Marine products

Marine exports, especially shrimp, face an equally tough situation. India is the third-largest supplier of marine products to the US, with frozen shrimp accounting for more than 90 per cent of the value. Tariffs undermine India’s price edge against Latin American suppliers, raising concerns about job losses in coastal communities that depend on aquaculture. To stay afloat, exporters are now looking at markets with rising demand, such as Russia, the United Kingdom and Gulf countries like the UAE and Saudi Arabia, where hospitality-led seafood consumption is growing.

Automobile components

Auto component makers, who rely on the US for nearly 29 per cent of their exports, also felt the pressure of Trump's tariff. With competing countries facing lower duties, Indian components became more expensive in the American replacement market. Companies are now eyeing Africa and Latin America, where demand for affordable vehicles is expanding, as they try to reduce their dependence on the US.

 

Overall, the steep US tariffs have reshaped India’s export landscape within months. While some sectors have found ways to pivot toward alternative markets, others are in a tight race to stay competitive.