By Rupin Chopra and Shantam Sharma
Trump’s Tariff’s: What It Means for Indian Businesses
On April 2, 2025, the US President Donald Trump, in second renewed presidential term, issued a sweeping Executive Order reintroducing “Reciprocal Tariffs”[1] — an aggressive trade move that has triggered ripples across global supply chains. India, among other significant U.S. trading partners, has found itself squarely in the crosshairs, with a fresh 26% ad valorem duty imposed on a large spectrum of its exports to the United States.
This article explores the legal context of these tariffs, their immediate impact on Indian businesses, and the broader implications for international trade.
Understanding the New U.S. Tariff Regime
What Are Reciprocal Tariffs?
Reciprocal tariffs refer to the imposition of import duties by the U.S. equivalent to those levied by its trading partners on American exports. In theory, this policy aims to ensure fairness and counteract trade imbalances. In practice, it introduces volatility and uncertainty, particularly for developing economies like India.
Legal Backing and Structure
President Trump’s Executive Order is grounded in the authority of the Trade Act of 1974[2], particularly Sections 301 and 332, which empower the President to take retaliatory measures in case of discriminatory or unfair trade practices. While WTO compliance[3] remains questionable — and will likely be challenged — the U.S. has continued to justify such unilateralism under the national interest exemption.
Key features of the April 2025 Executive Order:
- A baseline 10% tariff on imports from all countries (with exceptions).
- A country-specific tariff, effective April 9, 2025 — for India, this means an additional 26% over and above MFN duties.
- Exemptions include goods under Section 232 (steel, aluminium, auto), and Annex 2 items like pharmaceuticals, semiconductors, energy, and copper.
- Products with at least 20% U.S. origin content are taxed only on the non-U.S. portion, offering marginal relief to some Indian exporters.
Implications for Indian Sectors
The table below summarizes the key sectoral implications of the new U.S. tariff regime on Indian exports:
| Sector | Tariff Imposed | Impact |
| Marine Products (Shrimp, Fish) | 26% | High Negative |
| Honey | 26% | High Negative |
| Basmati Rice | 26% | Moderate Negative |
| Tea | 26% | High Negative |
| Cashew | 26% | Positive Opportunity |
| Bakery & Processed Foods | 26% | High Negative |
| Dairy Products | 26% | High Negative |
| Apparel (Knitted & Woven) | 26% | Positive Opportunity |
| Carpets & Made-ups | 26% | Moderate Opportunity |
| Footwear | 26% | Positive Opportunity |
| Gems & Jewellery | 26% | High Negative |
| Electronics (Smartphones) | 26% | Moderate Opportunity |
| Medical Devices | 26% | Moderate Negative |
| Pharmaceuticals | Exempted | No Impact (Currently) |
| Steel & Aluminium | 25% (Section 232)[4] | Ongoing Negative |
| Automobiles & Auto Components | 25% (Section 232) | Ongoing Negative |
| Copper, Semiconductors, Critical Minerals | Exempted | No Impact |
Conclusion
The Trump tariff regime underscores a return to transactional trade policies. For Indian businesses, especially MSMEs, this calls for:
- Strategic diversification into newer markets like the EU, Middle East, and ASEAN.
- Investments in compliance, U.S.-based warehousing, and local partnerships to minimize tariff exposure.
- Robust government intervention — through export subsidies, legal support, and accelerated FTAs.
While the current scenario presents serious headwinds, it also opens up recalibration opportunities for India’s export ecosystem.
[1] https://www.cnbc.com/2025/04/09/trumps-tariffs-imports-world-deadline-trade.html
[2]https://www.govinfo.gov/content/pkg/COMPS-10384/pdf/COMPS-10384.pdf
[3]Under WTO guidelines, member nations commit to “tariff bindings”, which set maximum tariff levels that cannot be exceeded unless renegotiated. For the US, the average bound tariff for all goods is 3.4 per cent. (https://www.business-standard.com/world-news/trump-tariffs-wto-gatt-reciprocal-tariff-rules-violations-explained-125040301244_1.html)
[4] Section 232 of the Trade Expansion Act of 1962 empowers the U.S. President to adjust imports, including tariffs, if they threaten national security. The investigation process is led by the Department of Commerce, and the Secretary of Commerce provides recommendations to the President.