US President Donald Trump has reignited trade tensions with India by announcing a 25% tariff on Indian imports on Wednesday, citing what he called a “massive trade deficit” between the two nations. In a post on Truth Social, Trump first declared that India would face a 25% tariff on Indian imports from August 1 and then posted that the US has a massive trade deficit with India.
“We have a massive trade deficit with India,” Trump said.
The US President’s decision to impose a 25% tariff on Indian imports came just days after he extended the deadline to August 1. Shortly before making the announcement, he reaffirmed that the deadline would not change, signaling that India should prepare for the new tariffs to take effect this Friday.
According to official US data, the trade deficit with India in goods reached a substantial $45.7 billion in 2024. The US imported goods worth $87.4 billion from India while exporting only $41.8 billion to the country.
However, economists and analysts caution that these figures only capture the goods trade balance. When services, education, technology transfers, and royalties are factored in, the US often records a surplus. This is primarily due to income from Indian students studying in the US, software licensing, arms sales, and intellectual property royalties.
A recent report by the State Bank of India (SBI) warned that a 20% tariff on Indian goods could lead to a 0.5% reduction in India’s GDP, stemming from reduced export volumes and declining competitiveness. The impact of a 25% tariff could be significantly more damaging.
The SBI study also noted that each 1% increase in tariffs could shrink Indian export volumes by 0.5%, underlining the sensitivity of India’s trade-led growth model to international barriers.
The announcement comes as U.S.-India bilateral trade hit a record $190 billion in 2024. India has made efforts to ease trade tensions by lowering duties on American goods such as Bourbon whiskey and Harley-Davidson motorcycles. While Trump and Prime Minister Narendra Modi had previously set a bold target of increasing trade to $500 billion, the newly imposed tariffs could now challenge that ambitious goal.
In his statement, Donald Trump criticised India’s trade practices, remarking, “India may be our friend, but we’ve done relatively limited business with them over the years because their tariffs are extremely high—among the highest globally—and they maintain some of the most restrictive and burdensome non-tariff trade barriers in the world.”
He also expressed concern over India’s ongoing defense and energy ties with Russia amid the Ukraine conflict. “They’ve long relied on Russia for the majority of their military equipment and are one of the biggest buyers of Russian energy, alongside China, at a time when the world is urging Russia to STOP THE KILLING IN UKRAINE. This is deeply troubling,” Trump said.
