Key Points

This will apply till a bilateral agreement is reached between the two nations and another executive order is issued by President of the United States.

Trump's executive order dated July 31 reads, "Certain foreign trading partners identified in Annex I to this order have agreed to, or are on the verge of concluding, meaningful trade and security agreements with the United States. Goods of those trading partners will remain subject to the additional ad valorem duties provided in Annex I to this order until such time as those agreements are concluded, and I issue subsequent orders memorializing the terms of those agreements."

The GTRI noted that this blanket tariff is one of the toughest trade actions the U.S. has taken against a major trading partner in recent years.

GTRI note stated "all goods from India will face a 25 per cent US tariff starting August 7, 2025. These will be over and above the standard MFN tariffs. India is subject to a flat 25 per cent ad valorem duty across all goods, with no exceptions by product or sector".

The absence of exemptions for critical sectors like pharmaceuticals, crude oil, and electronics will doubly impact Indian exports of petroleum products (USD 4.1 billion in FY2025), smartphones (USD 10.9 billion), and pharmaceuticals (USD 9.8 billion) to the U.S.

Other sectors like engineering goods, electronics, and textiles will also face the brunt of the higher tariffs.

Quick estimates by GTRI suggest that India's goods exports to the U.S. may decline by 30 per cent in FY2026, from USD 86.5 billion in FY2025 to USD 60.6 billion.

The U.S. has offered tariff exemptions to trading partners with whom trade agreement is reached for several key product categories.

These include finished pharmaceutical drugs, active pharmaceutical ingredients (APIs), and other essential drug inputs; energy products such as crude oil, refined fuels, natural gas, coal, and electricity; critical minerals; and electronics and semiconductors including smartphones, tablets, solid-state drives, and integrated circuits.

Meanwhile, goods from India that are already in transit will be allowed to pay earlier tariff rates, 10 per cent on most products (except items like steel and aluminium which face 50 per cent), until October 5, 2025.

However, further clarity is needed on additional 25 per cent duty on steel and auto, on which 50 per cent and 25 per cent respective tariff are imposed.

For India, the most affected categories are expected to be petroleum products, pharmaceuticals, and electronics, all of which have high import content and low domestic value addition.

- ANI