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Written by Haider Saleem
Journalist and Political Analyst | LinkedIn / X
This article explores:
1. What changed and when
2. Sector exposure overview
3. How India may reroute trade
4. India’s policy response
5. The future
6. Investors should follow this.
7. What to look out for next week
What changed and when
The United States imposed an additional 25% duty on products of India effective 27 August 2025. This builds on the earlier 25% “reciprocal” tariff plan announced in April.
Many Indian goods now face a 50% rate. This came under an executive order citing India’s indirect imports of Russian oil. China received a three-month reprieve on its talks; India did not.
Sector exposure overview
In 2024, U.S.–India goods trade reached $128.9 billion. This included $87.3 billion in U.S. imports from India.
The U.S. exported $41.5 billion to India. The goods deficit was $45.8 billion. The 50% effective rate does not cover every line item, but it touches much of the employment-intensive basket.
The first direct effects of the tariff on Indian exporters are in labor-intensive areas. These areas include textiles and apparel, leather goods, gems and jewelry, seafood, some auto parts, chemicals, and machinery. The full 50% tariff applies to these sectors.
Several U.S. buyers front-loaded inventory before the deadline; new orders in sensitive categories have slowed. Smartphones remain out for now; many pharmaceuticals are also exempt.
Transitional rules to remember are that cargoes booked before the decision will clear under old terms. This applies to cargoes that arrive in the U.S. before September 17. New orders face the 50% rate.
The grace date of September 17 allows for businesses to reduce inventory for qualifying shipments. After that, the new rules apply where not excluded.
The global angle: how India may reroute trade
New Delhi is hedging. It keeps a line open to Washington. At the same time, it reaching out to Japan, the EU, the UK, Australia, Brazil, and carefully, China. The intent is to cushion factory utilisation and jobs by diverting some orders. Scale will be uneven because few partners match U.S. demand depth.
Diplomacy is currently is extremely sensitive. PM Modi will visit Tokyo on 29–30 August. After that, he will go to Tianjin for the Shanghai Cooperation Organization (SCO) summit on 31 August–1 September. He is expect to have meetings with Xi Jinping and Vladimir Putin. Reuters also frames the broader Asia tour as a response to tariff fallout.
In domestic politics, agriculture and dairy are key issues in India’s trade talks. This slows down comprehensive deals, even when the industry wants quick progress.
India’s policy response
Policy signals focus on cash-flow and diversification.
On Wednesday, the government announced a six-year plan. This plan is worth about $28 billion. It aims to help exporters find new markets and get cheaper credit. Industry groups are seeking payroll support, lower power costs, and loan relief to retain workers. These steps cushion, but do not replace, lost U.S. demand.
The future
We can expect pauses and renegotiations in certain areas. Inventory reductions will continue until mid-September. We may also see freight re-routing and substitution tests in Vietnam, Bangladesh, Turkey, and other places. Markets will watch for carve-out clarifications, temporary waivers, and any sector reprieves.
Investors: what to track
- Order flow – Cancellations/deferrals in sector and shipper updates; inventory commentary around the grace window.
- Margins and pricing – Gross-margin guidance for textiles, gems, seafood, chemicals, and machinery; SKU-level pricing power will vary.
- Substitution and share shifts – Disclosures on relocated production to Vietnam/Bangladesh/Turkey or “China-plus-one” reversions.
- Policy tweaks – Any carve-outs, waivers, or financing support from New Delhi; small changes move order books.
- Diplomacy headlines – Readouts from Tokyo and Tianjin; movement with the EU/UK/Brazil on market access.
What to watch next week
1. Any CBP carve-out lists or grace-period clarifications.
2. Readouts from India–Japan and SCO meetings with trade items.
3. Government circulars implementing the exporter support program and sectoral credit lines.
4. Signals from Washington on resuming talks.
Footnotes
1. Federal Register Public Inspection
2. NYT, “Tariff Threat Turns Real for Imports From India
3. NYT, “India, Reeling From Hit to Its Exports, Casts About for New Trade Options,”
4. CNN Wire, “Trump makes good on threat to impose 50% tariffs on India imports,”
5. USTR, India country page, 2024 goods totals United States Trade Representative
6. WSJ (op-ed), agriculture/dairy as structural constraint in trade deals.
7. SCMP, diversification drive and travel schedule to Tokyo (Aug 29–30) and Tianjin SCO (Aug 31–Sep 1).
8. Reuters
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