Publications + Presentations

Summary

• Effective August 27, 2025, the U.S. has imposed a 50% tariff on Indian imports, combining a prior 25% reciprocal duty with an additional 25% penalty related to India’s continued purchase of Russian oil,
• Approximately two-thirds of India’s exports to the U.S. – notably textiles, gems, jewelry, seafood, carpets, and furniture – are expected to be significantly impacted, with potential export declines of 40–70%,
• Products such as pharmaceuticals, electronics, vehicles, and certain metals are exempt. Additional exceptions apply to humanitarian aid, shipments in transit, and goods under specific trade programs,
• Likely responses from India include expanding trade partnerships, offering financial relief to exporters, pursuing WTO action, and considering targeted counter-tariffs,
• The U.S. may explore negotiated exemptions, industry subsidies, and sourcing diversification to mitigate inflationary effects and support domestic stakeholders.

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On August 27, 2025, the U.S. Department of Homeland Security’s Customs and Border Protection (CBP) issued an official notice titled “Notice of Implementation of Additional Duties on Products of India Pursuant to the President’s Executive Order 14329.”

Published on August 6, 2025, Executive Order 14329 raised tariffs on Indian imports to 50%, effective 12:01 am EDT on August 27, 2025, combining a previous 25% reciprocal duty with an additional 25% "penalty" over India’s continued purchase of Russian oil. The notice modifies the Harmonized Tariff Schedule of the United States (HTSUS) as specified in an annex. The additional duty does not apply to goods properly entered under Chapter 98 provisions (per applicable CBP regulations), except for goods under heading 9802.00.80 (See annex here).

The Tariffs’ Estimated Impacts

Two-thirds of India’s exports to the U.S., estimated at $60 billion–$87 billion, will be severely affected by the new tariffs, particularly labor-intensive sectors like textiles, gems, jewelry, shrimp, carpets, and furniture. Analysts warn exports could fall by 40–70%, jeopardizing millions of jobs. Certain goods are exempted from such tariffs, such as goods made of iron and steel, aluminum and copper, as well as passenger vehicles, light trucks, and auto components. India’s pharma sector, as well as electronics (chips, mobile phones, and tablets), are exempt too. Exceptions are also available for shipments in transit, humanitarian aid, and items under reciprocal trade programs.

We believe both countries will continue to evaluate strategies in response to the windfall because of the tariffs in multiple ways:

India’s Anticipated Response Strategies

1. Trade Diversification

• Accelerating outreach to alternative export markets such as China, EU, ASEAN, Middle East, Latin America, and Africa
• Leveraging existing trade agreements (with UAE, Australia) and pursuing new ones with the EU and Africa

2. Export Support Packages

• Announcing relief funds, tax rebates, and credit guarantees for exporters hit hardest (textiles, jewelry, seafood, carpets, furniture)
• Possible rupee depreciation management through Reserve Bank of India interventions to keep exports competitive

3. Legal + Diplomatic Channels

• Filing a complaint at the World Trade Organization (WTO) challenging the unilateral U.S. tariffs as discriminatory

4. Counter-Tariffs (Selective Retaliation)

• Imposing reciprocal tariffs on U.S. goods like agricultural imports, aircraft parts, and technology products – though calibrated to avoid self-harm

U.S. Anticipated Response Strategies

1. Negotiated Pathways

• Offering India a tariff rollback deal if it reduces Russian crude imports or diversifies energy purchases
• Potentially proposing a sector-by-sector exemption (e.g., IT products, pharmaceuticals) to avoid hurting U.S. businesses reliant on India
• Providing subsidies or tax breaks to U.S. industries hurt by higher input costs from Indian imports

2. Mitigating Inflationary Risks

• Exploring ways to ease domestic inflation by diversifying sourcing away from India (and towards Vietnam, Mexico, Philippines, Bangladesh, etc.)
• Boosting U.S. manufacturing incentives to offset long-term reliance on Indian imports

Most Likely Outcomes

Looking into the crystal ball, our prediction is that India is likely to adopt a "resilient + retaliatory-lite" strategy – one focused on protecting exporters, diversifying markets, and resisting pressure to scale back Russian oil purchases.

And while the U.S. will continue to use tariffs as a negotiation weapon, it may soften its stance if domestic industries and consumers feel the pinch.