US slaps 25% tariff plus penalty on India: Here's how it compares to other countries

India’s trade with the United States is poised to face significant headwinds starting August 1, with the US imposing a 25 percent tariff plus penalty on Indian goods, which will have a significant bearing on high-growth sectors such as chemicals, machinery, and electronics. The move, announced by US President Donald Trump on July 30, is expected to dampen India’s recent export momentum in one of its fastest-growing markets.

The US tariffs on Indian goods exceed those imposed on comparable economies. Indonesia will face a 19 percent duty, while Vietnam and the Philippines will be subject to a 20 percent tariff. India, meanwhile, faces both the base tariff and a penalty, making it one of the most heavily targeted among Asian trading partners.

"Remember, while India is our friend, we have, over the years, done relatively little business with them because their Tariffs are far too high... INDIA WILL THEREFORE BE PAYING A TARIFF OF 25%, PLUS A PENALTY FOR THE ABOVE, STARTING ON AUGUST FIRST," Trump posted on Truth Social, also citing concerns from non-tariff restrictions, and strategic ties with Russia as reasons for the decision.

According to a Moneycontrol analysis of UN COMTRADE data, India’s trade with the US nearly doubled over the last decade, rising from $64.6 billion in 2013 to $118.4 billion in 2024. Exports have led the charge, climbing 89.3 percent, from $42 billion in 2013 to $79.4 billion in 2024, while imports have grown more moderately.

But it's not just volumes that have changed. The composition of trade has shifted significantly, with textiles, clothing, and stone products declining in share, and machinery, electronics, and chemicals rising sharply. In 2024, machinery and electronics made up nearly 25 percent of India’s exports to the US—up from less than 8 percent in 2013. Chemical exports also rose as India diversified into high-value segments.

On the import side, India’s fuel dependence on the US has grown significantly. Fuels accounted for 31.5 percent of total US imports in 2024, up from just 7 percent in 2013. Imports of metals also increased, rising from 4.8 percent to 7.1 percent over the same period.

India’s economic relationship with the US has deepened far beyond merchandise trade. US foreign direct investment (FDI) in India surged from $20.3 billion in FY17 to $70.7 billion in FY25, reflecting rising investor confidence and growing integration between the two economies.

Strategic cooperation has also intensified. The United States now accounts for 13 percent of India’s arms imports, up from 8 percent 15 years ago, underlining broader defence ties between the two democracies.

The decision comes just a week after India signed a major free trade agreement with the United Kingdom.