The Indian government has dismissed concerns over the 25% tariff imposed by former U.S. President Donald Trump on Indian exports, calling the move “negligible” in terms of its economic fallout. According to senior government sources, the expected impact on India's GDP will not exceed 0.2%, amounting to a manageable ₹66,000 crore loss on the ₹330.68 lakh crore nominal GDP projected for FY 2024–25.
This aligns with projections by independent economists, including one cited by Bloomberg, who pegged the hit to growth at around 0.3%.
No Compromise on Core Sectors, Trade Deal Still in Sight
Sources reiterated that India will not yield to American pressure to open sensitive sectors—particularly agriculture and dairy—under any trade deal. This includes resisting imports of beef and dairy from cows fed animal-based products like bonemeal, which could hurt religious sentiments. The government also ruled out allowing genetically modified (GM) crops into the country, reaffirming its unwavering support for Indian farmers.
“Securing national interest remains the top priority,” a source said, adding that the welfare of farmers, MSMEs, and entrepreneurs will not be compromised.
The punitive tariff comes amid a deadlock in India–U.S. trade deal negotiations, which stalled due to Washington’s insistence on opening Indian markets to American agricultural and dairy exports. India has consistently declined, citing both cultural sensitivities and the economic risk to its agrarian population—nearly half the nation’s 144 crore people rely on the sector for livelihood, even though it contributes under 20% to GDP.
The 2021 rollback of controversial farm laws after nationwide protests still looms large in the political memory, and the government is cautious not to repeat missteps in a sector seen as a major vote base.
Trump’s announcement followed frustration with what he sees as unfair trade practices. "India has been a good friend... but has charged basically more tariffs than almost any other country... you just can't do that," he told reporters in the U.S. hours before imposing the tariff.
Despite tensions, trade ties remain robust. The U.S. is India’s largest trading partner for the fourth straight year. Bilateral trade reached $132 billion in FY 2024–25. Indian exports to the U.S. grew 11.6%, reaching $86.51 billion, while imports rose to $45.33 billion.
Despite the tariff, sources said negotiations on the India–U.S. trade agreement are still “on track and moving in the right direction.” An interim pact is expected to be announced by September or October. Review and possible rollback of the 25% tariff could follow its finalisation.
While the government was initially optimistic about clinching the deal before the August 7 tariff implementation date, that now appears unlikely.