How India is creating an opportunity out of adversity by USA tariff pressure

Recently on 25th Sept 2025 US President Donal J Trump announced to impose 100% tariff on branded and patented pharmaceutical product imports from India since October 2025. In this blog we will explain the overall tariff pressure on India created by America and how India is responding to protect its market and expanding with new options.

Content

1.        India overall exports and imports and its share with India’s GDP

2.        India share of exports to United States of America with sector wise share

3.        India’s dependency on America for exports and its overall GDP

4.        USA tariff on India before trump arrival till 20th January 2025

5.        USA tariff on India after Trump arrival from 20th January 2025

6.        Actions taken by Indian Government to

   •        Provide domestic support to the exporters

   •        Provide International support to the exporters

7.        Conclusion

1.       India overall exports and imports and its share with India’s GDP

For FY 24-25 (April 2024 to March 2025) India overall

• Exports was 820.83 billion USD

• Imports was 915.19 billion USD

  
  

 The total deficit was 94.26 billion USD  

In FY 24-25 India had a GDP of approx. 3.9 trillion USD and had highest global growth in its real GDP @6.5% while for China it was 5%, for USA it was 2.8% and Global GDP growth was 3.2%

Above data for India has been taken from Press Information Bureau of India.

For China and USA the GDP growth date taken from World Bank

2. India share of exports to United States of America

We are considering only the merchandise exports for better understanding.

The total merchandise exports for India for (Financial Year) FY 24-25 was USD 437.42 billion out of which the share for USA was approx. 20% as below

The share of USA was 20% that is approx.  USS 86.51 billion which is significant and can have a strong impact under higher tariff.

If we further analyze the overall amount of USD 86.51 billion exports to USA the share of different sectors is as below

3.    India’s dependency on America for exports and its overall GDP

If we see compare the overall USA merchandise exports of USD 86.51 billion to India’s GDP 3.9 trillion the share in percentage is approx. 0.22% which is significant in value but the impact will not be a strong hindrance for GDP growth.

Also unlike China and USA, India’s GDP major share is consumed in its own domestic market which gives India a strong position in case of global trade wars.

 4.       USA tariff on India before trump arrival till 20th January 2025

Before Trump took over the first presidency, the USA tariff on India was majorly depending on bilateral commitments through World Trade organization framework and rates of Most Favored Nations with some rare sectoral trade actions like anti-dumping duty or safeguard action for limited commodities for limited period of time.

India was given a GSP (Generalized system of Preferences) meant for developing countries which benefited India with complete duty free or reduced duty imports.

Trump’s first term of presidency from 2017 – 2020. 

March 2018 -Trump imposed tariff of imports of many products like 25% on Steel and 10% on Aluminium on many countries including India.

Later tariff imposition on may products was removed but it remained same on imports of Steel and Aluminium.

2019 - Trump removed GSP (Generalized system of Preferences) for India.

Joe Biden term of presidency from 2021-2025

Even after Joe took the presidency position, the tariff imposition of Trump’s era remained nearly the same

• The steel and Alumunium tariff remained the same

• India was not given back the GSP preferential treatment

• There were regular trade disputes, investigations, trade barrier complaints going on

Joe did not start a tariff trade war with India but did not change the Trump imposed tariffs.

5.       USA tariff on India after Trump arrival from 20th January 2025

Date format – DD-MM-YYYY

6. a.       Actions taken by Indian Government to provide domestic support to the Indian exporters.

Government support to textile industry 

Importance – Textile industry share in Indian GDP is 2.3% which contributes to 13% of total industrial production and 12% of total exports from India and provides employment to approx. 45 million people in India.

Impact – Due to Trump Tariff the exports is hampered due to increase on cost.

Actions taken by India government – We have given detailed analysis in our earlier blog.

Indian government has removed the imports duty on raw cotton

This includes removal of earlier charges: -

• 5% of BCD (Basic Customs duty)

• 5% on AIDC (Agriculture Infrastructure and Development Cess)

• 10% on Social Welfare surcharge or both

There was total 11% duty on raw cotton imports.

Outcome of removing imports duty

• Ease out the raw cotton availability in Indian market

• Reduce the price and reduce the chance of inflation for cotton products

• Since the production cost will be less it would support for exports at a Cheaper price

• Protect small manufacturers who a most prone to price rise/trade war

Tax reduction - Indian government giving Tax relief to reduce global tariff trade war impact by increasing the purchasing power to boost domestic consumption and production.

• There has been reforms like reducing GST (Goods Service Tax) from 12% and 28% to 5% and 18% on most of the goods and increase in tax on sin and luxury goods like tobacco and luxury cars to 40%.

• This reform of tax reduction can boost Indian GDP by 0.2% to 0.4%.

• These tax reforms will offset the tariff impact on GDP.

• Indian government is reducing the imports duty on many products to make the base/raw material price cheap in India, which can give cost competitiveness to exporters also.

• Revival of schemes - like IES - Interest Equalisation Scheme, which is giving lower interest loans to exporters, subsidy and duty drawback to exporters, Refund and tax credits under RoDTEP – Remission of Duties and Taxes to Exports Products.  

b. Actions taken by Indian Government to provide International support to the exporters

• UK and India already have FTA, Free Trade Agreement deal in place.

• European Union has denied the US push to impose tariffs on India and working on actions to close more long-term deals with India. The India market of defense equipment and aerospace is attracting the European manufacturers as usually the contracts are one if the largest in the world for fighter jet equipment.

• Agreement with Switzerland, Norway, Iceland and Liechtenstein -India had a TEPA, Trade and Economic partnership Agreement with the EFTA, European Trade Free Association states - Switzerland, Norway, Iceland and Liechtenstein. The agreement was signed on 10th March 2024 and will enter into force from 1st October 2025.

• China – After USA tariff imposition on India, China is supporting India on trade deals. On19th April China unblocked the exports of few critical materials like - Specialty fertilizers, rare Earth minerals and tunnel boring machines.

• Brazil has come in forefront to support India as an individual nation and as a BRICS nation.

• Japan - India and Japan already have CEPA in place since 2011. CEPA stands for Comprehensive Economic Partnership Agreement.

Globally all countries are ready to welcome expat Indians to get the best brains after USA is putting extra charges for new H1B visa to Indians.

 7.       Conclusion

Every Challenge gives an opportunity to the world. The recent tariff imposition is giving a Chance to India to boost its domestic market and production and look for new opportunities for long term deal.