Trump Hits India With 25% Tariff Starting August 1; Major Export Sectors on Alert, Experts Warn of GDP Dip

Here’s a breakdown of how the 25% tariff announced by former U.S. President Donald Trump on Indian goods (effective August 1, 2025), along with an unspecified penalty tied to India’s purchases of Russian oil and military gear, could impact India—and what experts are forecasting.

Economic and Trade Effects

Export Headwinds GDP Risks

Such a shift would pull the GDP growth of India lower as well, which is already reduced to an estimated 6.2 % by FY 2026 by ICRA, in case the tariffs remain unresolved.

Elara Capital has cautioned that GDP will take a 20 basis-point hit in case the pharmaceutical exports, more than 30✱ of which are sold to the U.S., are brought into the tariff regime at large.

Sectoral Pressures

The hardest hit sectors are pharma, textiles, leather, marine products, auto parts, gems & jewelry and engineering goods.

One of the most seriously pinched industries is the gems & jewelry industry, a U.S. export of more than US $10 billion (approximately 30 % of the sector).

The larger regime of tariffs over steel/aluminum might impose huge losses on engineering goods exports (~US�� Snine billion).

Competitive Disadvantage

India has an unfavorable 25 % tariff compared to other countries such as Vietnam (20�� Ernestomellige capitalization 20� floating point percent, Indonesia (19� floating point percent), EU and Japan (15 floating point percent) on semblable exports of labor intensive goods and electronic products.

When the U.S. penalty is added to that, even such a country as Bangladesh or Sri Lanka can be ahead as long as its duties are not as high.

Market Volatility and Currency

The direct consequences were the depreciation of the rupee (~0.4 %), volatility in the equity markets, and strain in the investor sentiments especially on the export-linked industries.

Expert Opinions: Threats and Countermeasures

It is not economics but coercion.

The tariff move is arm-twisting, especially on sensitive areas such as dairy and agriculture, and was likened by IIFT VC Rakesh Joshi to India and UK balanced India-UK FTA which is ahead of its time, according to him.

Negotiations on Trade are not Dead

PwC India, EY, Kotak Mahindra and other economists regard the tariff as a strategic geopolitical lever, and anticipate that continuing negotiations will ultimately result in an agreement and lessen the time frame of the tariff in operation.

India Holding Firm

Think tanks such as GTRI point out that India has not made any compromise on main red lines (agriculture) as other countries and has maintained its WTO compliant position and has not entered into any one sided agreements.

Leadership Optimism

The industrialist Harsh Goenka envisions the benefit of diversification to reduce the dependence on the U.S. by driving India to explore markets such as Europe and ASEAN.

Strategic Outlook and Probable Scenarios

Short‑term:

Exporters are likely to experience short-term losses especially in the labour-intensive and tradable goods markets. The rupee can remain on the back foot and the markets respond to increased uncertainty.

Medium‑term:

Negotiations with the U.S. are likely to resume, with the possibility of a mini-deal or full Bilateral Trade Agreement (BTA) to be finalized before the end of the year, talks are to resume in August 2025.

Long‑term:

Should India survive the disruption, there is cushion in the form of services (e.g., IT exports 387.5billion in 202425). The Indian policy to diversify trade and its policy on safeguarding strategic sectors can be rewarded.

Final Thoughts

• The tariffs and associated penalty stem less from economic imbalance and more from geopolitics and negotiation posture.

• India’s resilience lies in its ongoing trade diplomacy, sectoral adaptability, and push for diversified partnerships beyond the U.S.

• While near‑term impacts could dent certain export demography, the expectation across analysts is that the disruptions may be temporary, resolvable, and not structurally crippling—provided ongoing trade talks yield results.