Global trade is undergoing a period of change as the United States recalibrates its tariff policies and implements country- and product-specific duties that affect India. An Executive Order issued on 31 July 2025 modified earlier reciprocal tariff measures and formally imposes a 25% additional ad valorem duty on imports from India, effective 7 August 2025; the order also updates the Harmonised Tariff Schedule of the United States (HTSUS) to implement country- and product-specific duties. The measure introduces anti-evasion provisions — including a punitive 40% duty on goods found to be transshipped to circumvent tariffs — and provides for enhanced monitoring and regulatory enforcement by the Secretary of Commerce and the US Trade Representative, with transitional provisions for goods already in transit prior to the effective date. Separately, an Executive Order dated 6 August 2025 links additional tariff action to India’s direct or indirect import of Russian Federation oil and prescribes a further 25% ad valorem duty on Indian-origin imports, effective 27 August 2025. As a result, effective 27 August 2025, the combined additional duties on applicable Indian-origin goods will amount to 50%.

Our report, 'Navigating tariff turbulence', offers clarity amid this volatility, equipping businesses with insights, context, and actionable strategies to mitigate risk, remain compliant, and leverage global trade realignments to their advantage.

What these tariffs mean for India

These Executive Orders change the US cost structure for affected Indian-origin goods and will require operational responses from exporters and trade stakeholders. With the additional duties in place, businesses should expect potential impacts on price competitiveness in the US market and on contractual and supply-chain arrangements. In light of the stricter anti-evasion framework and enhanced enforcement authority signalled by the US, exporters will need to review and strengthen compliance processes, reassess pricing and margin calculations, and verify routing and rules-of-origin practices.

Practically, sectors with significant exposure to the US market should:

1.

Reassess pricing strategies and contractual terms to reflect altered landed costs;

2.

Reassess pricing strategies and contractual terms to reflect altered landed costs;

3.

Explore market diversification and use of preferential trade agreements to reduce reliance on a single market; and

4.

Engage with industry bodies and trade authorities to coordinate responses and seek clarifications on exemptions and transitional provisions.

These steps will help businesses manage immediate operational adjustments and position themselves to respond to any further regulatory developments.

The ripple effect of tariffs across Indian sectors

The sector-wise impact of the US’s reciprocal tariffs policy include:

Exports to the US were valued at USD 9 billion in FY24. While largely exempt from the new tariffs, the industry faces margin pressures if exemptions are withdrawn in future rounds.

High US duties could hit Indian exports of vegetables and processed foods. To reduce some friction, India is negotiating tariff cuts on almonds, lentils, cranberries, and pistachios.

Increased duties on garments may impact this labour-intensive sector, leading to reduced competitiveness, lower revenues, and employment losses.

While tariffs do not directly impact services, a potential tightening of H-1B visa norms could affect Indian IT firms’ operations in the US

Affected by the existing 25% Section 232 tariffs, India’s small share of US steel imports may result in dumping from other countries, disturbing local markets.

Tariff cuts by India (e.g., motorcycles from 50% to 30%) may be offset by reciprocal US tariffs, impacting export competitiveness in a niche but high-value category.

India has cut duties on bourbon and wines as part of negotiation tactics. However, reciprocal tariffs could still impact premium segments.

These sectors face rising US duties. However, India can gain as an alternative to Chinese exporters, especially under the production-linked incentive (PLI) scheme.

A pause in the US-China tariff tensions

The May 2025 Geneva agreement between the US and China marked a temporary pause in escalating trade tensions. This initial deal introduced a 90-day tariff truce beginning 14 May 2025, reducing US duties on Chinese goods from 145% to 30%, and China reciprocating by slashing tariffs from 125% to 10%. While a welcome relief for global markets and supply chains, the deal left untouched core security-related levies, including those under Sections 301 and 232.

China also agreed to remove specific non-tariff barriers, such as restrictions on rare earth exports. However, sectors such as semiconductors and fentanyl precursors remain outside the truce. The agreement provides temporary stability but fails to resolve deeper structural disputes.

While the pause alleviates global trade strain for India, it also revives competition from China, particularly in export-oriented sectors. Indian exporters must use this window to consolidate their US market share and diversify trade relationships.

Trump’s ‘Liberation Day’ tariffs redefine trade rules

In a sweeping move, President Trump declared a national emergency under the IEEPA in April 2025 and imposed new tariffs dubbed the “Liberation Day” tariffs. A baseline 10% ad valorem duty was imposed on all imports from 5 April, escalating to as much as 50% for specific countries, including a 26% duty on Indian goods – a huge tariff impact. Exemptions were carved out for sectors like pharmaceuticals, energy, and semiconductors.

India, grouped among 60 high-deficit countries, faced punitive tariffs reflecting its own high tariff walls. The move directly challenged the WTO norms and the MFN principle. Although tariffs such as those on autos and steel were covered under other provisions like Section 232, these new reciprocal duties applied across broader categories.

These US tariffs heightened costs for Indian exporters and disrupted long-standing supply chain relationships. However, they also incentivised India to recalibrate its trade strategy, reduce tariff asymmetries, and pursue bilateral deals offering better market access in return for concessions.

Tariff uncertainty continues as courts weigh in

The US Court of International Trade had earlier invalidated the “Liberation Day” tariffs, ruling that President Trump had exceeded his constitutional authority under the IEEPA. The court emphasised that such sweeping tariff actions lacked clear congressional guidance and violated the non-delegation doctrine.

However, on 29 May 2025, the US Court of Appeals issued a temporary stay, allowing the US tariffs to remain in effect during the appeals process. This move preserves the status quo, maintaining tariff collections while the legal battle continues. The decision adds uncertainty for global businesses, who must now navigate shifting trade policies amid unresolved judicial interpretations.

How Grant Thornton Bharat can help

Grant Thornton Bharat offers end-to-end support to help Indian businesses manage the ripple effects of the US’s reciprocal tariff regime. Our approach includes:

Navigating tariff turbulence
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Navigating tariff turbulence

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